Written by A.J. Brown


Dollar SignIn the crazy world of stock options trading, there are all kinds of different acronyms and abbreviations tossed around. The problem? Rarely do writers take the time to inform their readers what the heck they’re talking about. Most option traders run into this problem when they’re getting started.

Three of the most common option trading acronyms are OTM, ATM, and ITM. What do they mean?

OTM - Out of the Money

When an option is "out of the money," it has not yet reached the strike price. The option has no intrinsic value, only potential value based on time remaining before expiration, expectations of underlying stock price movement, etc.

ATM - At the Money

An option that is "at the money" has reached the strike price. An option that has reached its strike price can now be exercised.

ITM - In the Money

When an option is "in the money," that means it has gone beyond the strike price. Now the option has intrinsic value not based on speculation.

It is helpful to know shorthand abbreviations like these because they are used so frequently. So if you weren’t familiar with these, now you are!

Have a great weekend.

A.J. Brown

Categories: Education / Options

Leave a Reply

Video: Covered Call Writing  

Learn How to Write Covered Calls

In this series of 6 videos, I show you how to execute my covered call writing strategy from start to finish. Watch the first video instantly when you click for more information. Click for more »