Out-Of-The-Money: An option is out-of-the-money when the market price of an instrument on which you hold an option is not close to the strike price. Call options — which you buy when you think the price is going up — are out-of-the-money when the market price is below the strike price. Put options — which you buy when you think the price of the underlying instrument is going down — are out-of-the-money when the market price is higher than the strike price. For example, a call option on a stock with a strike price of $50 would be out-of-the-money if the current market price of the stock were $40. And a put option at $50 on the same stock would be out-of-the-money if its market price were $60. When an option expires out-of-the-money, it has no value.

 

Related Words

Out-Of-The-Money: An option is out-of-the-money when the market price of an instrument on which you hold an option is not close to the strike price. Call options — which you buy when you think the price is go . . . View Full Definition

Out-Of-The-Money Option: A call option is out of the money if the strike price is greater than the market price of the underlying security. That is, you have the right to purchase a security at a price higher than t . . . View Full Definition

In-The-Money: An option is in-the-money at any point up to expiration if the exercise price is below the market price of a call option or above the market price of a put option. That means an in-the-money . . . View Full Definition

Strategic Buyout: Buying or selling an out-of-the-money put option and call option on the same underlying instrument, with the same expiration. Profits are made only if there is a drastic change in the underl . . . View Full Definition