In The Money Options VS Out Of The Money Options - Lesson 4

Описание: This video will cover difference between In The Money Options VS Out Of The Money Options

What Is "In the Money" (ITM)?
"In the money" (ITM) is an expression that refers to an option that possesses intrinsic value. ITM thus indicates that an option has value in a strike price that is favorable in comparison to the prevailing market price of the underlying asset:

An in-the-money call option means the option holder has the opportunity to buy the security below its current market price.

An in-the-money put option means the option holder can sell the security above its current market price.

What is "at the money" (ATM)?
At the money (ATM) is a term used to describe an options contract with a strike price that is identical to the underlying market price. At the money options see a lot of trading activity, because they are so close to becoming profitable.

At the money options have no intrinsic value and will incur a loss if exercised due to the premium paid for the option. However, ATM is the point at which the option will start to have an intrinsic value.

What Is Out of the Money (OTM)?
"Out of the money" (OTM) is an expression used to describe an option contract that only contains extrinsic value. These options will have a delta of less than 50.0.

An OTM call option will have a strike price that is higher than the market price of the underlying asset. Alternatively, an OTM put option has a strike price that is lower than the market price of the underlying asset.

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