# At The Money

## What is 'At The Money'

At the money is a situation where an option's strike price is identical to the price of the underlying security. Both call and put options are 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 it 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.

## Differences Between Types of 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. The intrinsic value for a call option is calculated by subtracting the strike price from the underlying security's current price. The intrinsic value for a put option is calculated by subtracting the underlying asset's current price from its strike price.

A call option is said to be in the money when the option's strike price is less than the underlying security's current price. Conversely, a put option is said to be in the money when the option's strike price is greater than the underlying security's stock price. A call option is said to be out of the money when its strike price is greater than the current underlying security's price. On the other hand, a put option is said to be out of the money when its strike price is less than the underlying asset's current price.

The term "near the money" is sometimes used to describe an option that is within 50 cents of being at the money. For example, assume an investor purchases a call option with a strike price of \$50.50 and the underlying stock price is trading at \$50. The call option is said to be near the money. The option would also be near the money if the underlying stock price was trading between \$50.51 and \$51.

## Option Pricing

An option's price is made up of intrinsic and extrinsic value, or time value. Similar to out-of-the-money options, at-the-money options only have time value because they possess no intrinsic value. For example, assume an investor purchases an at-the-money call option with a strike price of \$25 for a price of 50 cents. The time value is equivalent to 50 cents and is largely affected by the passage of time and changes in implied volatility.