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.


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.

  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. In The Money

    1. For a call option, when the option's strike price is below ...
  6. Intrinsic Value

    Intrinsic value is the actual value of a company or an asset ...
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  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. 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 >>
  3. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  4. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  5. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  6. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>

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