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 ...
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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"?

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  5. When is a put option considered to be "in the money"?

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