What is ITM,OTM,ATM?

ITM,OTM,ATM

 The terms ITM, OTM, and ATM refer to the moneyness of options—essentially, whether exercising an option would be profitable, based on the current price of the underlying asset.

Here’s what each one means:

🔵 ITM (In the Money)

  • Call Option: ITM when the current price of the underlying is above the strike price.
    Example: Stock is $110, Call strike = $100 → ITM by $10.

  • Put Option: ITM when the current price of the underlying is below the strike price.
    Example: Stock is $90, Put strike = $100 → ITM by $10.

✅ Profitable to exercise (excluding premium paid).

⚪ ATM (At the Money)

  • An option is ATM when the strike price ≈ current price of the underlying asset.
    Example: Stock is $100, Call or Put strike = $100.

⚖️ Break-even point (no intrinsic value).

🔴 OTM (Out of the Money)

  • Call Option: OTM when the stock price is below the strike price.
    Example: Stock is $90, Call strike = $100 → OTM by $10.

  • Put Option: OTM when the stock price is above the strike price.
    Example: Stock is $110, Put strike = $100 → OTM by $10.

❌ Not profitable to exercise. Has only time value.

Summary Table:

Option TypeITM ConditionATM ConditionOTM Condition
CallStock > Strike PriceStock = Strike PriceStock < Strike Price
PutStock < Strike PriceStock = Strike PriceStock > Strike Price

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