# What Is an At-the-Money Option?

Okay, so this article is all about the options trading concept of "at the money" (ATM) options, and how they compare to "in the money" (ITM) and "out of the money" (OTM) options. It breaks down the strike price, underlying asset, intrinsic value, time value, expiration, volatility, and interest rates that are important to understand when it comes to options trading. Whether you're a beginner or an experienced trader, this article is a must-read if you want to understand these key concepts and how to use them in options trading strategies. So get your learn on and check it out!

(Source:OptionBros)

**At The Money Options**

When an option is at the money, it means that the strike price is the same as the current market price of the underlying asset. For example, if the current market price of a stock is $50, and the strike price of a call option is also $50, the option is at the money. At the money options are also sometimes referred to as "at the strike" options.

At the money options have no intrinsic value, which means that the option is only priced based on its time value. The time value of an option is influenced by a variety of factors, including the time until expiration, the volatility of the underlying asset, and interest rates.

**In The Money Options**

In the money (ITM) options are options where the strike price is below (in the case of a call option) or above (in the case of a put option) the current market price of the underlying asset. For example, if the current market price of a stock is $50, and the strike price of a call option is $40, the option is in the money. In the money options have intrinsic value, which means that the option has some value that is "in the money" already.

The amount of intrinsic value in an in the money option is equal to the difference between the strike price and the current market price of the underlying asset. For example, if the strike price of a call option is $40, and the current market price of the underlying asset is $50, the option has $10 of intrinsic value.

### Out Of The Money Options

Out of the money (OTM) options are options where the strike price is above (in the case of a call option) or below (in the case of a put option) the current market price of the underlying asset. For example, if the current market price of a stock is $50, and the strike price of a call option is $60, the option is out of the money. Out of the money options have no intrinsic value, and their price is based solely on their time value.

The premium of an out of the money option is generally lower than the premium of an in the money or at the money option. This is because there is no intrinsic value in the option, and the option is only priced based on its time value.

### Conclusion

In options trading, at the money options are options where the strike price is the same as the current market price of the underlying asset. These options have no intrinsic value, and their price is based solely on their time value. In the money options have intrinsic value, and their strike price is below (in the case of a call option) or above (in the case of a put option) the current market price of the underlying asset. Out of the money options have no intrinsic value, and their strike price is above (in the case of a call option) or below (in the case of a put option) the current market price of the underlying asset.

In summary, at the money options are an important concept to understand in options trading, as they are a key part of many options strategies. Whether you are a beginner or an experienced options trader, it is important to understand the differences between at the money, in the money, and out of the money options.