At The Money

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DEFINITION of 'At The Money'

A situation where an option's strike price is identical to the price of the underlying security. Both call and put options will be simultaneously "at the money." For example, if XYZ stock is trading at 75, then the XYZ 75 call option is at the money and so is the XYZ 75 put option. An at-the-money option has no intrinsic value, but may still have time value. Options trading activity tends to be high when options are at the money.

BREAKING DOWN 'At The Money'

"At the money" is one of three terms used to describe the relationship between an option's strike price and the underlying security's price, or option "moneyness." The other two are "in the money," meaning the option has some intrinsic value, and "out of the money," meaning the option has no intrinsic value. Also, sometimes the term "near the money" is used to describe an option that is within 50 cents of being at the money.

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RELATED FAQS
  1. What happens when a security reaches its strike price?

    In the derivatives market, moneyness describes the situation in which a derivative is either in the money, at the money or ... Read Full Answer >>
  2. How do I set a strike price for an option?

    The strike price of an option is the price at which the contract can be exercised. The strike price of a stock and an index ... Read Full Answer >>
  3. What is an option's implied volatility and how is it calculated?

    Implied volatility is a parameter part of an option pricing model, such as the Black-Scholes model, that gives the market ... Read Full Answer >>
  4. Why are options very active when they are at the money?

    Stock options, whether they are put or call options, can become very active when they are at the money. In the money options ... Read Full Answer >>
  5. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
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    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>

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