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 ?
I have always maintained that specialized managed futures, distressed, deep-value securities and out-of-the-money option strategies have the asymmetric return profiles that are required to fulfill Portfolio B's mandate.
Summary Statistics for Casino Executive Option Holdings (1993 - 1998) Table II shows summary statistics for executive option holdings, out-of-the-money option holdings, and the extent to which the out-of-money options are below the weighted average exercise price.
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.
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.
The latter option is quite notable, as more than 17,000 contracts have swapped hands on this out-of-the-money option, which is home to only 42 contracts at the present juncture.
8 cents during the crisis, for deep out-of-the-money options.