At The Money Options Trading

At-the-Money Options

At-the-Money Options

There are three states of "moneyness" for options: In-the-money options, at-the-money options and out-of-the-money options. In-the-money options have intrinsic value. That is, if the options are exercised, the underlying asset is bought or sold at a favorable price. Out-of-the-money options have strike prices that are not favorable to exercise. At-the-money may or may not be exercised. At-the-money options have strike prices that are equal to the underlying asset prices. 

Understanding when options are in-the-money, at-the-money or out-of-the-money is quintessential to option traders. Moneyness is one of the important factors that affects the value of options. Options Education is important for all traders to learn in-the-money, at-the-money and out-of-the-money options.

Further, moneyness affects option greeks, which are very important to options analysis. At-the-money options have deltas around 0.50. And at-the-money options have thetas, gammas and vegas that are greater than their counterparts ( in-the-money options or out-of-the-money options ).