Out-of-the-money option

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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 the market price, which is not valuable. A put option is out of the money if the strike price is lower than the market price of the underlying security.

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.
References in periodicals archive ?
The acceleration of vesting of these out-of-the-money options is being undertaken primarily to eliminate any future compensation expense the Company would otherwise recognize in its income statement with respect to these options with the implementation of the Financial Accounting Standard Board (FASB) statement "Share-Based Payment" (FAS 123R) effective for the Company on January 1, 2006.
Stock options rode the bull market of the 1990s to a peak of popularity, then fell amid one of the severest bear markets in history, leaving employees at many companies with deeply out-of-the-money options.
5) Bodurtha and Courtadon (1987) find that, for currency options with maturities less than 30 days, the degree of underpricing for out-of-the-money options was as high as 28.
For example, investments in notional principal contracts (swaps), guarantees, surety agreements, certain out-of-the-money options and other similar arrangements may be considered positions in substantially similar or related property.
The impact of out-of-the-money options is often mistakenly left out of position reports.
If all unvested, out-of-the-money options eligible to participate in the offer were tendered, NCI would reduce current annualized stock compensation expense by approximately $1.
The circular discloses that Celestica is seeking shareholder approval at the meeting for a proposed voluntary option exchange program that would permit eligible employees to surrender certain out-of-the-money options for US$1.
Burkle acquiring more than 20% of the Company - a scare tactic that is ridiculous given the facts - the truth is Leonard Riggio is the only stockholder with control, as evidenced by the compliance of his Board and his efforts to tighten that control through his recent exercise of out-of-the-money options on nearly one million shares.
Another sign of the high demand for puts over calls lies in the implied volatility of the equity's out-of-the-money options.
These out-of-the-money options provide a layer of options-related resistance for the short term.
In the June series, more than 25,600 contracts have gathered at these out-of-the-money options.