Moneyness

DEFINITION of 'Moneyness'

A description of a derivative relating its strike price to the price of its underlying asset. Moneyness describes the intrinsic value of an option in its current state.

BREAKING DOWN 'Moneyness'

Moneyness tells option holders whether exercising will lead to a profit. There are many forms of moneyness, including in,out or at the money. Moneyness looks at the value of an option if you were to exercise it right away. A loss would signify the option is out of the money, while a gain would mean it's in the money. At the money means that you will break even upon exercising the option.

RELATED TERMS
  1. In The Money

    1. For a call option, when the option's strike price is below ...
  2. At The Money

    A situation where an option's strike price is identical to the ...
  3. Exercise Price

    The price at which the underlying security can be purchased (call ...
  4. Out Of The Money - OTM

    A call option with a strike price that is higher than the market ...
  5. Deep Out Of The Money

    An option with a strike price that is significantly above (for ...
  6. Time Value

    The portion of an option's premium that is attributable to the ...
Related Articles
  1. Professionals

    F. Characteristics of All Options

    All option contracts are issued and their performance is guaranteed by the Options Clearing Corporation (OCC). Standardized options trade on the exchanges, such as the Chicago Board Options Exchange ...
  2. Professionals

    European vs. American Options and Moneyness

    CFA Level 1 - European Vs. American Options and Moneyness. Differentiates European and American options and contrasts the concepts of instrinic and time value. Also discusses the moneyness of ...
  3. Professionals

    Calls And Puts

    Calls And Puts
  4. Options & Futures

    What Is Option Moneyness?

    Get the basics under your cap before you get into the game.
  5. Professionals

    OPTION PREMIUMS

    Option Premiums The price of an option is known as its premium. Factors that determine the value of an option and, as a result, its premium, are: The Relationship of The Underlying Stock Price ...
  6. Professionals

    Option Premiums

    The price of an option is known as its premium. Factors that determine the value of an option and, as a result, its premium, are: The Relationship of The Underlying Stock Price to The Option’s ...
  7. Professionals

    Alternative Investments

    Alternative Investments
  8. Professionals

    Option Prices and the Time to Expiration

    CFA Level 1 - Option Prices and the Time to Expiration. Learn how to find the time value of an option. Discusses the relationship between the time value of an option and its time to maturity.
  9. Professionals

    Incentive Stock Options

    CFP Online Study Guide - Employee Benefits Planning - Incentive Stock Options
  10. Options & Futures

    Options Basics: How Options Work

    Now that you know the basics of options, here is an example of how they work. We'll use a fictional firm called Cory's Tequila Company.
RELATED FAQS
  1. How do I change my strike price once the trade has been placed already?

    Learn how the strike prices for call and put options work, and understand how different types of options can be exercised ... Read Answer >>
  2. What is the difference between in the money and out of the money?

    Learn about how the difference between in the money and out of the money options is determined by the relationship between ... Read Answer >>
  3. What happens when a security reaches its strike price?

    Learn more about the moneyness of stock options and what happens when the underlying security's price reaches the option ... Read Answer >>
  4. When is a call option considered to be "in the money"?

    Learn about call options, their intrinsic values and why a call option is in the money when the underlying stock price is ... Read Answer >>
  5. When is a put option considered to be "in the money"?

    Learn about put options, what they are, how these financial derivatives operate and when put options are considered to be ... Read Answer >>
  6. Where did the terms in-the-money and out-of-the-money come from?

    Learn what the terms "in the money" and "out of the money" mean, where the terms come from, and how investors use the terms ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center