At the Money

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At the Money

An option contract with a strike price exactly equal to the price of the underlying asset. In this situation, the option contract has no intrinsic value. However, it can easily develop an intrinsic value if the option becomes in-the-money. At-the-money options are extremely volatile because they can become in-the-money or out-of-the-money quickly.
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(2.) As firms usually grant at-the-money options, the grant value is based on at-the-money option value.
Table 1 lists estimation results selecting at-the-money option price data and out-of-the-money option price data within the sample.
The strikes of the call-on-call options are set equal to 0.5, 1.0, 1.5, 2.0, and 2.5 times the one-month at-the-money option price, respectively.
(21) They determined that 18.9% of unscheduled at-the-money option grants to top executives between 1996 and 2005 were backdated or otherwise manipulated.
Next, assuming that the volatility smile can be approximated by a piecewise linear function (see Dumas et al., 1994), we compute the implied volatility for an at-the-money option by linearly interpolating between the implied volatilities of the in-the-money and out-of-money options.
exercise price of an at-the-money option should presumably be based on
Because of accounting treatment differences between in-the-money and at-the-money option grants, backdating resulted in materially understated employee compensation expenses and overstated operating income and company performance.
Suppose an at-the-money option grant in our sample has been backdated by twenty business days.
Instead, Bates (1996) approximates the relation between the BS IV and expected variance until expiry with a Taylor series expansion of the BS price for an at-the-money option. That is, for at-the-money options, the BS formula for futures reduces to
By making grants before the release of good news, the manager effectively awards himself an in-the-money option, which is more valuable than the at-the-money option that he appears to grant himself.
Lassek explained terms such as margin call, at-the-money option and strike price during the seminar.
Louis' monthly Monetary Trends, said, "Using the trading prices of options on the S&P 100, the CBOE estimates the implied volatility corresponding to a hypothetical at-the-money option with one month to expiration.