OTM

Out of the Money (abbreviation: OTM) – any option contract that has only extrinsic value (time or volatility), with no intrinsic value (no “real” value). This means any call option contract where the option strike is above the current underlying price OR any put option contract that is trading below the current underlying price. It can also refer to option spreads, for example an out of the money (OTM) bear call spread would mean that the call option strikes in the spread are above the current underlying price.

If you want more background reading Dough.com has a really good article that explains it nicely.

« Back to Glossary Index

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>