Status of an Option (‘moneyness’)
An option can be described as being in one of three states: In-the-money (ITM), at-the-money (ATM) or out-of-the-money (OTM).
- An option is in-the-money (ITM) when the strike rate is better than the underlying market rate.
- An option is at-the-money (ATM) when the strike rate equals the underlying market rate.
- An option is out-of-the-money (OTM) when the strike rate is worse than the underlying market rate.
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