Options: What is ATM, ITM, OTM?

The strike price is the price at which a buyer of a call option can buy the security while for put options it is the price at which the security can be sold. The strike price is fixed in the contract and does not fluctuate with any change in the underlying script.

The strike prices are decided by the exchange based on the volatility in the underlying script which previously was decided based on the denomination of the script.

The difference between underlying securities current spot price and strike price represents the profit /loss that the trader makes upon sale or exercise of the option.

ITM Options (In the money options)
a) A call option is said to be in ITM if the strike price is less than the current spot price of the security.
I.e. Spot- Strike > 0
b) A put option is said to be ITM if the strike price is more than the current spot price of the security.
I.e. Spot- Strike < 0

ATM Options (At the money options)
a) A call option is said to be in ATM if the strike price is equal to the current spot price of the security.
I.e. Spot- Strike = 0
b) A put option is said to be ATM if the strike price is equal to the current spot price of the security.
I.e. Spot- Strike = 0

OTM options (Out of the money options)
a) A call option is said to be in OTM if the strike price is more than the current spot price of the security.
I.e. Spot- Strike < 0
b) A put option is said to be OTM if the strike price is less to the current spot price of the security.
I.e. Spot- Strike > 0
 
Let us consider an example to understand it better.