Moneyness

AAA

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.

INVESTOPEDIA EXPLAINS '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. At The Money

    A situation where an option's strike price is identical to the ...
  2. Out Of The Money - OTM

    A call option with a strike price that is higher than the market ...
  3. Exercise

    To put into effect the right specified in a contract. In options ...
  4. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
  5. Intrinsic Value

    1. The actual value of a company or an asset based on an underlying ...
  6. In The Money

    1. For a call option, when the option's strike price is below ...
RELATED FAQS
  1. Should I buy options that are in the money or out of the money?

    Choosing which specific option to buy can often be a complicated process, and there are literally hundreds of optionable ... Read Full Answer >>
  2. If a long call is owned on the record date of a stock, is the owner of the option ...

    The owner of a long call for a stock is entitled to a dividend only if the option is exercised prior to the ex-dividend date, ... Read Full Answer >>
  3. What is the theory of asymmetric information in economics?

    The theory of asymmetric information was developed in the 1970s and 1980s as a plausible explanation for common phenomena ... Read Full Answer >>
  4. How does market risk differ from specific risk?

    Market risk and specific risk are two different forms of risk that affect assets. All investment assets can be separated ... Read Full Answer >>
  5. How is perpetuity used in the Dividend Discount Model?

    The basic dividend discount model (DDM) creates an estimate of the constant growth rate, in perpetuity, expected for dividends ... Read Full Answer >>
  6. How can an investor profit from the cyclical nature of the electronics sector?

    An investor can profit from the cyclical nature of the electronics sector in two ways. He can employ sector rotation, shifting ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Reducing Risk With Options

    If you want to use leverage to your advantage, you must know how many contracts to buy.
  2. Options & Futures

    How To Avoid Closing Options Below Intrinsic Value

    To get the best return possible on your options trading, it is important to understand how options work and the markets in which they trade.
  3. Options & Futures

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  4. Options & Futures

    Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.
  5. Options & Futures

    Trading The QQQQ With In-The-Money Put Spreads

    Even beginners may use this strategy to trade a bullish outlook.
  6. Options & Futures

    What Is Option Moneyness?

    Get the basics under your cap before you get into the game.
  7. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  8. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  9. Options & Futures

    How To Trade Orange Juice Options

    How do orange juice options work and which factors determine the orange juice valuations? Here's a sneak peak into the world of orange juice options.
  10. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center