UK Accounting Glossary
An at-the-money option is an option whose strike price is equal to the market price of its underlying security. For example, if a call option on stock XYZ, Inc. has a strike price of $50 and XYZ stock is currently trading for $50 per share, then this call is trading at-the-money. However, the buyer of an at-the-money option would not exercise the option as long as it remains an at-the-money option since it has no intrinsic value. Intrinsic value is only part of the option premium. Prior to the option’s expiration date, an at-the-money option also has time value. The time value of an at-the-money option is influenced chiefly by the amount of time remaining until the expiration date. The other major factors affecting the premium of an at-the-money option are the volatility and dividends of its underlying security along with the current risk-free interest rate (e.g. the T-bill rate).
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for At The Money Option are sourced/syndicated and enhanced from:
This glossary post was last updated: 4th February 2020.