What are ITM, OTM, and ATM Options?

The terms In The Money (ITM), Out of The Money (OTM), and At The Money (ATM) describe an option’s position relative to the current price of its underlying asset. Let’s understand in detail:

A) ITM – In The Money

• A call option is ITM when the underlying price is above the strike price.
• A put option is ITM when the underlying price is below the strike price.

For example, if NIFTY is at 25,000, a “24,800 Call” represents ITM and a “25,200 Put” represents ITM. 

Generally, an ITM option has intrinsic value, in addition to any remaining time value.

B) OTM – Out of The Money

• A call option is OTM when the underlying price is below the strike price.
• A put option is OTM when the underlying price is above the strike price.

For example, if NIFTY is at 25,000, a “25,200 Call” is OTM and “24,800 Put” is OTM.

An OTM option has no intrinsic value, and its premium consists of time value + other components.

C) ATM – At The Money

An ATM option has a strike price that is approximately equal to the current price of the underlying. For example, if NIFTY is trading around 25,000, the 25,000 Call and 25,000 Put are considered ATM options. 

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