What is ATM, ITM and OTM

In this article we will understand what is an At the money (ATM), In the Money (ITM) and Out of the Money(OTM) strike prices in terms of option chain and AOC.

1. At the Money (ATM)

The strike price just adjacent to SPOT Price are called ATM strike prices.

Here in the image Strike Price 23500 and 23450 are ATM strike prices because it is adjacent to the spot price which is 23465.6

1. ATM strike prices has maximum time value.
2. Delta is near about 0.5
3. It has highest theta decay
4. It is moderately priced.

2. In The Money (ITM)

Strike prices that are smaller than the spot price are called ITM for CE

• Here strike prices 23400, 23350, 23300 and so on are ITM Strike Prices as per the given screenshot.

For Put Option strike prices greater than the spot price are called ITM

– Here strike prices 23550, 23600, 23650 and so on are the ITM strike prices for PE.

1. ITM Strike prices have higher premium value
2. ITM has lower time value.
3. ITM has higher delta.
4. ITM has lower theta decay.

3. Out of The Money (OTM)

For CE Option strike prices greater than the spot price are called OTM

– Here strike prices 23550, 23600, 23650 and so on are the ITM strike prices for PE.

Strike prices that are smaller than the spot price are called OTM for PE

Here strike prices 23400, 23350, 23300 and so on are ITM Strike Prices as per the given screenshot.

1. OTM Strike prices have lower premium value
2. OTM has lower time value in terms of price and higher in terms of percentage.
3. OTM has lower delta.
4. OTM has higher theta decay.

In AOC there is an option in settings to automatically highlight ITM and OTM strike prices.

Please check this article on settings and customization of AOC for details.

Related posts:

What is ATM, ITM and OTM Chapter 3 | Defining Support and Resistance Chapter 1 | Introduction to AOC Chapter 4 | Types of Support and Resistance