At The Money Option

Business, Legal & Accounting Glossary

Definition: At The Money Option



Full Definition of At The Money Option


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).


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Definition Sources


Definitions for At The Money Option are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 4th February, 2020 | 9 Views.