Investopedia explains 'Out Of The Money - OTM'
For example, consider a stock that is trading at $10. For such a stock, call options with strike prices above $10 would be out of the money calls, while put options with strike prices below $10 would be out of the money puts. Out of the money options are significantly cheaper than in the money or at the money options, and offer the biggest leverage or bang for the buck if the option trader's view proves to be correct.
In the case of a stock that is trading at $30, a one-month call with a $29 strike may be priced at $1.50, while a one-month call with a $31 strike may be priced at 40 cents. If the stock appreciates to $32 by option expiry, the $29 call would be trading at about $3.00, while the $32 call would be priced around $1.00. In this case, the gross return of 150% for the $31 call is well above the 100% return for the $29 call.
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