top button
Flag Notify
    Connect to us
      Site Registration

Site Registration

What is the difference between in the money and out of the money?

+1 vote
151 views
What is the difference between in the money and out of the money?
posted Jul 14, 2017 by Amrita

Share this question
Facebook Share Button Twitter Share Button LinkedIn Share Button

1 Answer

0 votes

In-the-money option: An in-the-money (ITM) option is an option that would lead to a positive cash flow to the holder if it were exercised immediately. A call option on the index is said to be in-the-money when the current index stands at a level higher than the strike price (i.e. spot price > strike price). If the index is much higher than the strike price, the call is said to be deep ITM. In the case of a put, the put is ITM if the index is below the strike price.

Out-of-the-money option: An out-of-the-money (OTM) option is an option that would lead to a negative cash flow it were exercised immediately. A call option on the index is out-of-the-money when the current index stands at a level which is less than the strike price (i.e. spot price < strike price). If the index is much lower than the strike price, the call is said to be deep OTM. In the case of a put, the put is OTM if the index is above the strike price.

answer Jul 15, 2017 by Anushka
...