Option Moneyness: ITM, ATM, OTM

Lesson Content

Option moneyness refers to the relationship between the strike price of an option and the current price of the underlying asset. In the Indian market, options are traded on indices like Nifty, Bank Nifty, and stocks like Reliance, TCS, and Infosys. In-the-money (ITM) options have intrinsic value, with call options having a strike price below the current market price and put options having a strike price above the market price. For example, if Reliance Industries is trading at ₹2,500, a 2,400 strike call option is ITM. At-the-money (ATM) options have a strike price close to the current market price, with minimal intrinsic value. If Nifty is at 19,500, the 19,500 strike option would be ATM. Out-of-the-money (OTM) options have no intrinsic value, with call options having a strike price above the market price and put options having a strike price below. For instance, if TCS is trading at ₹3,200, a 3,300 strike call option is OTM. Understanding moneyness is crucial for selecting the right option strategy based on market outlook and risk tolerance.