An option is said to be In The Money, if on exercising it, the option buyer gets a positive cash flow
An option is said to be Out of The Money, if on exercising it, the option buyer gets a negative cash flow.
An option is said to be At The Money, if spot price is equal to the strike price
Volatility is a measure of the magnitude of the change of prices (up or down) of the underlying asset. Higher the volatility, higher is the option premium and vice versa.
Interest rate differential between two currencies - It measures the difference between risk free interest rate of base currency and that of quoting currency. As the differential increase the value of call option increases and value of put option decreases and vice versa.
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