Option contracts are often described as being ITM, ATM, or OTM.
On this page, we’ll discuss at-the-money (ATM) options.
An ATM option has either very little or no intrinsic value, much like an OTM option. That is to say that if the contract expired now, it would have very little to no value. ATM options are therefore made up almost entirely of extrinsic (time) value due to the time remaining until expiration and the implied volatility.
For example, consider the following:
At The Money Call Option: when the strike price is near or equal to the current stock price.
At The Money Put Option: when the strike price is near or equal to the current stock price.
ATM options will carry a delta of around .50 (calls) or -.50 (puts) as the price of the underlying stock is on the fence regarding its direction. ATM options are therefore very sensitive to price movement as they can so easily go into the money and start to behave more like the underlying asset (shares of stock).
Return to the main options glossary page to learn more terms.
