At the Money (ATM)
Quick Definition
An option whose strike price is equal or very close to the current market price of the underlying asset.
What Is At the Money (ATM)?
An at-the-money (ATM) option has a strike price that is at or very near the current trading price of the underlying asset. ATM options have the highest time value (extrinsic value) and are most sensitive to changes in implied volatility (highest vega). They have a delta of approximately 0.50 for calls and -0.50 for puts, meaning they have roughly a 50% probability of expiring in the money. ATM options experience the most rapid time decay (theta) as expiration approaches. They are commonly used for straddles, strangles, and other volatility strategies because they offer the greatest sensitivity to price movement in either direction.
At the Money (ATM) Example
- 1With stock XYZ trading at $100, the $100 strike call and put are both at the money — they have no intrinsic value, only time value
- 2A trader sells an ATM straddle (both call and put at the $50 strike) when the stock is at $50, collecting maximum premium and betting on low volatility
Related Terms
In the Money (ITM)
An option that has intrinsic value — a call with strike below the stock price or a put with strike above the stock price.
Out of the Money (OTM)
An option with no intrinsic value — a call with strike above the stock price or a put with strike below the stock price.
Moneyness
The relationship between an option's strike price and the current price of the underlying asset, classified as in the money, at the money, or out of the money.
Strike Price
The predetermined price at which the holder of an option can buy (call) or sell (put) the underlying asset upon exercise.
Intrinsic & Extrinsic Value
The two components of an option's price: intrinsic value (profit if exercised now) and extrinsic value (time value plus volatility premium).
Call Option
A contract giving the holder the right, but not the obligation, to buy an underlying asset at a specified price within a specified time period.
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