What Is Out Of The Money?

Out of the money is a trading term referring to the value of options. If an option is said to be 'out of the money' then it is worthless. Out of the money does not mean you have lost your money yet, because the loss has not been realized. However, it does mean that selling the option at that point in time will lose your money.

For options:

  • A call option is out of the money when the strike price is above the market price of the asset
  • A put option is out of the money when the strike price is below the market price of the asset

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