For call Options, a Strike Price which is higher than the current price is known as out of the money. Option contracts at this Strike Price will become worthless on the Expiration date of the option contract because the price is higher than what someone could buy an asset or commodity for in the market. With puts, a Strike Price that is lower than the current price is also out of the money because the asset can be sold for a higher value than the Strike Price of the Put Option.
Out of the money Options have no Intrinsic Value, however, they may have Extrinsic Value which can vary according to: the length of time before the option expires, the Volatility of the Underlying asset and their proximity to the current market price.
Contributed by: Ralph Windsor
Out of the money Options have no Intrinsic Value, however, they may have Extrinsic Value which can vary according to: the length of time before the option expires, the Volatility of the Underlying asset and their proximity to the current market price.
Related Directory Entries
Featured Video View All
In, At and Out of the Money
Options Industry Council (OIC) Video Glossary covering In, At, and Out Of The Money options.
External Links
CBOE Options Dictionary - Out Of The Moneyhttp://www.cboe.com/learncenter/glossary_m-r.aspx#outofthemoney
CBOE's dictionary with definitions of common options terminology.
View CBOE Options Dictionary in Options Market Glossary Directory
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