Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

At the Money

What it is:

"At the money" is an expression that refers to an options contract whose strike price is the same as the current market price.

How it works (Example):

Option contracts come in a variety of strike prices -- the value at which the option may be exercised. Whenever the strike price and the market price are the same, the option is said to be "at the money."

For example, say a call option has a strike price $100. With the underlying shares trading at $90 per share, the call option has no intrinsic value. However, once the shares hit $100, they are said to be "at the money" and begin to have intrinsic value and can be exercised.

Why it Matters:

Being at the money is the point at which an options contract begins to have intrinsic value. Options at the money have a better chance of being exercised and are therefore more valuable than out of the money options.