This post is meant to be a landing page for a topic in the pinned Welcome post. At some point it will be locked, but feel free to add suggestions for edits in the meantime.
You will often see references to the moneyness of an option. This is simply a comparison of the strike price of the option and the current price of the underlying.
Assume XYZ is trading for $100. The call with a strike price of $105 is out of the money (OTM), meaning the underlying is less than the strike price. You wouldn't exercise this option and pay $105 per share, because you can buy the shares cheaper on the open market. However the put with a strike price of $105 is in the money (ITM). If you exercised this put, you could sell shares for $105, which is more than the current price on the open market.
Calls and puts with a strike price of $100 are at the money (ATM) while XYZ is still trading for $100. This is the point where the strike price and the underlying price is the same. Options that are at or near the money are typically the heaviest traded strikes.
As the underlying trades for different prices throughout the duration of the option contract, the option can be at varying levels of moneyness. It's not uncommon for options to oscillate between In, Out, and At the money if the underlying has a lot of volatility within a range.