At the Money (ATM)
What it is:
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.