Out of the Money

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Out-of-the-Money Option

1. A call option with a strike price more than the value of the underlying asset.

2. A put option with a strike price less than the value of the underlying asset.

In both these situations, the option contract has no intrinsic value. If an option is deep out of the money, it is unlikely that the option will be in-the money by the expiration date. If possible, out-of-the-money options are sold; if not, they expire worthless and the option holder loses the premium.

Out of the Money (OTM)

What Does Out of the Money (OTM) Mean?

(1) For a call option, when an option's strike price is higher than the market price of the underlying asset.

(2) For a put option, when the strike price is below the market price of the underlying asset.

Investopedia explains Out of the Money (OTM)

Basically, an option that would be worthless if it expired today.

Related Terms:
• Call Option
• In the Money
• Put Option
• Stock Option
• Strike Price

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