Elearnmarkets - Financial Market Learning
  • Courses
  • Webinars
  • Stories
  • Language
    • English
    • Hindi
    • Bengali
No Result
View All Result
Get Free Course
  • Basic Finance
  • Derivatives
    • Futures
    • Options
  • Financial Planning
  • Fundamental Analysis
  • Technical Analysis
  • Mutual Funds
  • Marketshala
  • Miscellaneous
Elearnmarkets - Learn Stock Market, trading, investing for Free
  • Courses
  • Webinars
  • Stories
  • Language
    • English
    • Hindi
    • Bengali
No Result
View All Result
Get Free Course
Elearnmarkets - Learn Stock Market, trading, investing for Free
No Result
View All Result
Home Derivatives
Option Moneyness – ITM, OTM & ATM Options 1

Option Moneyness – ITM, OTM & ATM Options

Elearnmarkets by Elearnmarkets
May 28, 2024
in Derivatives
Reading Time: 6 mins read
0
31.5k
VIEWS
Share on FacebookShare on XShare on WhatsApp
Table of Contents
What is the Intrinsic Value?
What is ITM, ATM & OTM?
Option Moneyness Example
Key Takeaways

Options can be classified into three categories that are also referred to as moneyness. Options Moneyness is used as an indicator to decide if the option contract will make money if it were immediately exercised.

These three categories are At The Money (ATM), Out of The Money (OTM), and In The Money (ITM). This classification helps the trader in deciding which strike price to trade, given a particular situation in the market.

Before we go into the details of these three categories, let us discuss the concept of intrinsic value: –

What is the Intrinsic Value?

Intrinsic value refers to the value of an option that the buyer makes from the option who has the right for exercising that option on a particular day.

The formula for calculating the intrinsic value of the option is:

Call option Intrinsic Value: Spot Price – Strike Price

Put option Intrinsic Value: Strike Price – Spot Price

The intrinsic value is always positive and it is never negative.

Let us understand the intrinsic value with an example:

Suppose Nifty 50 is trading at the spot price of 11415 CE and the strike price is 11400 CE and you have the right to exercise this option today.

When you exercise this option, then the money that you will make from this contract will be equal to the intrinsic value minus the premium.

Let us forget about the premium for the time being.

The intrinsic value will be: Spot Price- Strike Price = 11415-11400 = Rs.15

Learn option trading strategies with Option Trading Made Easy course by Market Experts

Thus, if you exercise your options contract today, then you will earn a profit of Rs.15 not taking the premium into the account.

What is ITM, ATM & OTM?

1. In The Money (ITM)

If the option contract is ITM, then it has an intrinsic value.

A call option is ITM if the stock price is higher than the strike price.

On the other hand, a put option is ITM, if the stock price is lesser than the strike price.

2. At The Money (ATM)

If the options contract strike price is the same as the stock price then it is said to be ATM.

The same rule applies to both call options as well as put options.

3. Out of The Money (OTM)

If an option contract is OTM, then it does not have intrinsic value.

A call option is OTM if the stock price is lower than the strike price.

On the other hand, a put option is OTM, if the stock price is more than the strike price.

From the above, we can conclude that:

Option Moneyness

Option Moneyness Example:

The above concepts can be better understood by the example of options chain Nifty 50 as explained below:

Option Moneyness – ITM, OTM & ATM Options 2
Source – nseindia.com

Suppose currently Nifty 50 is trading at 11,400. The ATM will be at 11,400 for both the put and call options.

For call options:

  • All option strikes that are lower than ATM options are ITM option, thus they have a grey background
  • All option strikes that are  higher than ATM options are OTM options, thus they have a white background

Similarly for put options:

  • All option strikes that are  higher than ATM are ITM options, thus they have a grey  background
  • All option strikes that are  lower than ATM are OTM options, thus they have a white background

When the option buyer or seller has to decide how much of a premium they want to pay, then they should take into consideration whether the underlying asset has intrinsic value or not. 

Key Takeaways:

  • Option Moneyness can be classified into three categories, At The Money (ATM), Out of The Money (OTM), and In The Money (ITM).
  • Intrinsic value refers to the value of an option that the buyer makes from the options that has the right for exercising that option on a particular day.
  • A call option is ITM if the stock price is higher than the strike price.
  • If the options contract strike price is the same as the stock price then it is said to be ATM
  • If an option contract is OTM, then it does not have intrinsic value.

Happy Learning!

Tags: advanceenglishoption moneynessoptions
ShareTweetSend
Get Kotak Offer Get Kotak Offer Get Kotak Offer
Previous Post

Problems in Technical Analysis and How to Overcome Them

Next Post

ओपन इंटरेस्ट एनालिसिस से मार्केट ट्रेंड की पहचान करने में कैसे मदद मिलती है?

Elearnmarkets

Elearnmarkets

Elearnmarkets (ELM) is a complete financial market portal where the market experts have taken the onus to spread financial education. ELM constantly experiments with new education methodologies and technologies to make financial education effective, affordable and accessible to all. You can connect with us on Twitter @elearnmarkets.

Related Posts

Forex vs Stocks
Miscellaneous

Forex vs Stocks: Which Market Should You Trade First

May 13, 2025
106
Collar Option Strategy
Options

How to Use Collar Option Strategy?

May 2, 2025
212
Futures vs Options
Derivatives

Futures vs Options: What’s the Difference?

December 26, 2024
830
Scalping Trading Strategies
Options

Top 5 Scalping Trading Strategies For Higher Return

May 5, 2025
4.3k

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Disclaimer

Elearnmarkets (Kredent InfoEdge Pvt. Ltd.) is a SEBI-registered Research Analyst (RA) entity (SEBI Registration No.: INH300007493). The information provided in this article is for educational and informational purposes only and should not be considered as an offer to buy or sell any securities or investment products.

The stocks, securities, and investment instruments mentioned herein are not recommendations under SEBI (Research Analysts) Regulations, 2014. Readers are advised to conduct their own due diligence and seek independent financial advice before making any investment decisions.

Investments in securities markets are subject to market risks. Please read all related documents carefully before investing. Investing in Equity Shares,
Derivatives, Mutual Funds, or other instruments carry inherent risks, including potential loss of capital. Elearnmarkets (Kredent InfoEdge Pvt. Ltd.) does not provide any guarantee or assurance of returns on any investments. Past performance is not indicative of future performance.

Elearnmarkets Logo

Follow Us

Facebook-f X-twitter Instagram Linkedin-in Youtube Telegram

Register on Elearnmarkets

Continue your financial learning by creating your own account on Elearnmarkets.com

Register Free Account

Download App

Playstore logo
Download on app store

Categories

  • Basic Finance
  • Derivatives
  • Financial Planning
  • Fundamental Analysis
  • Technical Analysis
  • Mutual Funds
  • Miscellaneous

Popular On Elearnmarkets

  • Market Superheroes:
  • Vivek Bajaj
  • Chetan Panchamia
  • Ashish Kyal
  • Premal Parekh
  • Abhijit Paul
  • Jegan
  • Sivakumar Jayachadran
  • Jyoti Budhia
  • Vivek Gadodia
  • Vishal Mehta
  • Piyush Chaudhry
  • Santosh Pasi
  • Gomathi Shankar
  • Market Superheroes:
  • Vivek Bajaj
  • Chetan Panchamia
  • Ashish Kyal
  • Premal Parekh
  • Abhijit Paul
  • Jegan
  • Sivakumar Jayachadran
  • Jyoti Budhia
  • Vivek Gadodia
  • Vishal Mehta
  • Piyush Chaudhry
  • Santosh Pasi
  • Gomathi Shankar
  • Courses:​
  • Options Trading
  • Dow Theory
  • Momentum Trading
  • Stock Investing
  • Harmonic Chart Patterns
  • Algo Trading
  • Elliot Wave Theory
  • Advanced Excel
  • Cryptocurrency
  • NSE Certification Course
  • Courses:​
  • Options Trading
  • Dow Theory
  • Momentum Trading
  • Stock Investing
  • Harmonic Chart Patterns
  • Algo Trading
  • Elliot Wave Theory
  • Advanced Excel
  • Cryptocurrency
  • NSE Certification Course
  • Webinars:
  • Bank Nifty Scalping
  • Intraday Trading Strategies
  • Options Trading Strategies
  • Options selling
  • Price Action
  • Relative Strength
  • Tax Planning
  • Options Buying
  • Growth Stocks
  • Portfolio Management
  • Risk Management
  • Renko Charts
  • Crude Oil
  • Traders Psychology
  • Moving Average
  • Multibagger Stocks
  • Webinars:
  • Bank Nifty Scalping
  • Intraday Trading Strategies
  • Options Trading Strategies
  • Options selling
  • Price Action
  • Relative Strength
  • Tax Planning
  • Options Buying
  • Growth Stocks
  • Portfolio Management
  • Risk Management
  • Renko Charts
  • Crude Oil
  • Traders Psychology
  • Moving Average
  • Multibagger Stocks
  • Free Learning Modules:
  • Intraday Trading
  • Options Scalping
  • Swing Trading
  • Financial Modelling
  • RSI Indicator
  • Bollinger Bands
  • Pricing of Futures
  • Personal Finance
  • Initial Public Offerings (IPO)
  • Value Investing
  • Technical Indicators
  • Candlesticks
  • Chart Patterns
  • Option Greeks
  • ELSS Funds
  • Banking and Insurance
  • Real Estate
  • Gold
  • Free Learning Modules:
  • Intraday Trading
  • Options Scalping
  • Swing Trading
  • Financial Modelling
  • RSI Indicator
  • Bollinger Bands
  • Pricing of Futures
  • Personal Finance
  • Initial Public Offerings (IPO)
  • Value Investing
  • Technical Indicators
  • Candlesticks
  • Chart Patterns
  • Option Greeks
  • ELSS Funds
  • Banking and Insurance
  • Real Estate
  • Gold
  • Book Summaries:
  • Rich Dad Poor Dad
  • Psychology of Money
  • The Intelligent Investor
  • The Richest Man in Babylon
  • Think and Trade Like a Champion
  • Value Investing and Behavioural Finance
  • Trading in the Zone
  • Learn to Earn
  • Book Summaries:
  • Rich Dad Poor Dad
  • Psychology of Money
  • The Intelligent Investor
  • The Richest Man in Babylon
  • Think and Trade Like a Champion
  • Value Investing and Behavioural Finance
  • Trading in the Zone
  • Learn to Earn
  • Tools:
  • CAGR Calculator
  • SIP Calculator
  • eLearnOptions
  • Future Value Calculator
  • Present Value Calculator
  • Atal Pension Yojana
  • Cost of Delay Calculator
  • Become a Crorepati
  • Tools:
  • CAGR Calculator
  • SIP Calculator
  • eLearnOptions
  • Future Value Calculator
  • Present Value Calculator
  • Atal Pension Yojana
  • Cost of Delay Calculator
  • Become a Crorepati

© 2025 Elearnmarkets. All Rights Reserved

  • Visit Elearnmarkets
  • Courses
  • Webinars
  • Financial Guides
  • Get Free Counselling
  • Visit Elearnmarkets
  • Courses
  • Webinars
  • Financial Guides
  • Get Free Counselling

Download Our App

No Result
View All Result
  • Article Categories
    • Basic Finance
    • Derivatives
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • ETFs & Mutual Funds
    • Marketshala
    • Miscellaneous
  • Language
    • Hindi
    • Bengali
    • English
  • Courses
  • Webinars
  • Stories
Get Free Course

© 2024 Elearnmarkets All Rights Reserved

Guide to Options Strategies
Discover Options Strategies For Making Money In All Market Conditions
Download Guide For FREE
Trading Mentorship Program