OTM (out-of-the-money)
OTM
An option with no intrinsic value — call strike above spot, or put strike below spot.
OTM options have lower premiums and high implied leverage. Most exotic-yield strategies that "harvest premium" sell OTM options, banking on most expiring worthless.
Related terms
- ATM (at-the-money)An option whose strike is approximately equal to the current underlying price — pure time value, no intrinsic.
- ITM (in-the-money)An option that has positive intrinsic value — call strike below spot, or put strike above spot.
- OptionA derivative giving the holder the right (not obligation) to buy ([[call-option]]) or sell ([[put-option]]) at a fixed price by expiry.