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Moneyness
describes the relationship between an option's strike price and the current stock price. It tells you whether exercising would be profitable.
ITM options have intrinsic value. OTM options have only time value. ATM options are at the sweet spot for certain strategies.
Quick answer
ITM = profitable to exercise now. ATM = strike equals stock price. OTM = not profitable to exercise. ITM has intrinsic value, OTM has only time value. ATM has highest time value.
Moneyness describes a strike relative to the stock price: in-the-money carries intrinsic value, at-the-money sits nearest the price, out-of-the-money is all time value.
The Three States of Moneyness
Every option is either ITM, ATM, or OTM. This matters because it determines how much the option is worth and how it behaves.
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In the Money (ITM)
An option is ITM when exercising it would be profitable (ignoring premium paid).
Call ITM: Stock price > Strike price
Put ITM: Stock price < Strike price
Example: Stock at $105. The $100 call is ITM by $5. The $110 put is ITM by $5.
At the Money (ATM)
Strike price equals (or is very close to) the current stock price.
ATM options have the highest time value and are most sensitive to stock price changes (highest gamma).
Out of the Money (OTM)
An option is OTM when exercising would NOT be profitable.
Call OTM: Stock price < Strike price
Put OTM: Stock price > Strike price
OTM options are cheaper but need bigger moves to profit.
Quick Reference
| Stock = $100 | Call | Put |
|---|---|---|
| $95 Strike | ITM | OTM |
| $100 Strike | ATM | ATM |
| $105 Strike | OTM | ITM |
Key Takeaways
- ITM = has intrinsic value, more expensive, higher probability
- ATM = highest time value, most price sensitive
- OTM = cheaper, needs big move, lower probability
- Calls and puts have opposite moneyness at same strike
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Options Profit Calculator- Written by
- ApexVol Research Team
Quantitative options research. All calculations use live institutional-grade data — the same source professional volatility desks use. - Reviewed by
- Ryan Silk, ApexVol Founder
Reviewed for technical accuracy. 10+ years trading options; built ApexVol's pricing engine, Greeks model and IV-rank methodology.
Revised as market conditions and institutional data change. Last revised 2026-08-04. How we research →
Questions
What people ask
about this.
What is the difference between ITM, OTM and ATM options?
Moneyness describes where the strike sits relative to the stock price. A call is in the money (ITM) when the stock trades above the strike, at the money (ATM) when the stock is at or very near the strike, and out of the money (OTM) when the stock is below it. For puts the relationship inverts: ITM means the stock is below the strike. Only ITM options carry intrinsic value; ATM and OTM options are made up entirely of extrinsic (time and volatility) value.
Is it better to buy in the money or out of the money options?
Neither is universally better — they trade cost against probability. ITM options cost more but carry intrinsic value, have higher delta (roughly 0.60-0.95) and lose less to time decay, so they behave more like stock. OTM options are cheap and offer more leverage, but they have low delta, decay to zero quickly and need a larger move to pay off. ITM suits directional conviction with lower risk of total loss; OTM suits low-cost, high-payoff speculation where losing the full premium is acceptable.
What does at the money mean in options trading?
An at-the-money option has a strike essentially equal to the current stock price. In practice traders treat the nearest listed strike as ATM. These options carry the most extrinsic value and the highest gamma and vega of any strike, which makes them the most sensitive to both movement and changes in implied volatility. ATM straddles are the standard way to price an expected move.
Does moneyness affect the chance of assignment?
Yes. The OCC automatically exercises options that expire in the money by $0.01 or more, so ITM short options are almost certain to be assigned at expiration. ATM options are the genuinely uncertain case — this is pin risk, where you cannot know before the close whether you will be assigned. OTM options expire worthless and are not assigned. Delta is a reasonable running estimate of assignment probability.
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