65-Day Academy · Day 50 · Options: Foundations
ITM, ATM, OTM — Moneyness and Its Consequences
The three zones
In-the-money (ITM): exercise would have value (call strike < stock; put strike > stock). At-the-money (ATM): strike ≈ stock. Out-of-the-money (OTM): no exercise value. Moneyness decides the premium's composition: ITM = mostly intrinsic (stock-like), ATM = maximum time value (gamma/theta battleground), OTM = all time value (lottery-ticket profile).
The delta proxy
Rough rule: an option's delta ≈ its probability of expiring ITM. A 30-delta call ≈ 30% chance of finishing in the money. This converts moneyness into a probability statement — the honest way to think about "cheap" OTM options: cheap because they are USUALLY worthless.
What you'll practise
Stock at $100. Which options are in-the-money? (Select all that apply)
10 XP in the app · introductory
Sources
- Moneyness (ITM/ATM/OTM)Investopedia
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All lessons are for educational purposes only and are not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk and are not suitable for every investor.