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What is ATM (AT The Money) Options?

ATM are those options having Strike near to Spot Price. Current Price and Underlying is near. Example : NIfty is trading at 16970 Put Option : 17100                    ITM 17000                    ATM 16900                    OTM ATM Option has Delta Value 0.50 why ??? Because Probability of Nifty going up or down from Current Price is 1/2 i.e. 50% Call Option : 17100                     OTM 17000                     ATM 16900                     ITM  For Option video : https://youtu.be/XbwnxRLp7L8 Exercise : Reliance : CMP 2200 Rs PUT Option : 1800 2100 2200 2500 Call Option : 2000 2100 2200 2400 You can Comment here for more updates and Query on any option related Topics.

Basics of Options

Learning on Options :

 

The owner of an option can decide to exercise it or not.

Every option has limited life and after that time period it expires. say 30 days or Specified Expiry period.

American options can be exercised at any time before or at expiration.

European options can be exercised only at expiration.

 

Strike Price of an Option

Every option has a fixed strike price, which is the price that applies to the buying or selling of the underlying asset when the option’s owner exercises the option.



Market Price

Market price of an option (or market value or option premium) consists of intrinsic value and time value. Market price is something totally different from strike price.

Option premium is sum of Intrinsic value plus time value.

option value = Intrinsic value + Time value


So, Option is Combination of 2 Parts :
Intrinsic value
Time Value


Call options are in the money when their strike price is lower than the current market price of the underlying asset.

Call Pay Off: Spot- Strike

Put options are in the money when their strike price is higher than the current market price of the underlying asset.
 
Put Pay Off: Strike- Spot
 
Pay off of call option
Strike price < Market price
 
Pay off of Put Option

Strike Price > Market price

How to find intrinsic value of an option, let we understand following concept first....

 In the Money, At the Money, & Out of the Money

Options with intrinsic value are said to be in the money(ITM).

Options whose strike price is equal or very close to the current market price of the underlying asset are said to be at the money(ATM).

Other options, which have no intrinsic value, are said to be out of the money(OTM).

In short,

ITM option consist more of Intrinsic value

ATM option consist of both Intrinsic and Time Value

OTM option consist only Time value

 Example : 




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