Out-of-the-money option

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 ?
com, which seek to produce incremental monthly returns that will generate additional cash via out-of-the-money option credit spreads trades.
The Black formula underestimates the possibility that a significant jump may bring an out-of-the-money option back into the money.
upon expiration, an in-the-money option will be fully exercised and an out-of-the-money option will not be exercised at all).
Stern: The concept of having an out-of-the-money option should be very attractive to institutional investors because you're betting on the future.
A good chunk of this volume has traded at NOK's June 14 strike, with more than 9,100 puts crossing the tape at this out-of-the-money option.
More than 8,700 contracts reside at this out-of-the-money option in the front three months.
Open interest at this out-of-the-money option soared from 7,279 to 20,881 contracts.
While this isn't enough call open interest to make this site an impenetrable wall of structural resistance, it is important to note that this out-of-the-money option is where the speculative crowd is placing its bets.
In both the November and January series, this barely out-of-the-money option is home to peak open interest, with about 13,400 open positions in the front-month series and nearly 51,600 open calls at the January 65 strike.
This out-of-the-money option is home to more than 12,800 contracts and represents a tough level of potential resistance the shares must overcome.
This out-of-the-money option added 6,200 contracts to bring its open interest to 8,221.
This out-of-the-money option has seen more than 5,100 contracts change hands this afternoon.