Out Of Money (OTM)

You are here:
< Back to Knowledge base

Out of the money is a term used to describe a call option with a strike price that is higher than the market price of the underlying asset, or a put option with a strike price that is lower than the market price of the underlying asset.

At expiry, though, an option is worthless if it is OTM.

That option could end up being worth more than the trader paid for the option, even though it is currently out of the money.

Options contracts give the holder the right to buy or sell an underlying security at a predetermined strike price for a limited amount of time.

If the underlying security is trading at a price that makes the exercise of the option unprofitable based on the strike price, then the options contract is trading “out of the money.”