Moneyness: ITM, ATM, OTM
Moneyness describes where the current price is relative to an option's strike. It's not a prediction - it's a location.
The Three States
| Term | Meaning | Has Intrinsic Value? |
|---|---|---|
| ITM (In-the-Money) | Option would pay out if expired now | Yes |
| ATM (At-the-Money) | Strike ≈ current price | Minimal |
| OTM (Out-of-the-Money) | Option would expire worthless now | No |
For Calls vs Puts
Moneyness is opposite for calls and puts:
| Condition | Call | Put |
|---|---|---|
| Spot > Strike | ITM | OTM |
| Spot ≈ Strike | ATM | ATM |
| Spot < Strike | OTM | ITM |
Interactive Diagram
Drag the slider to see how moneyness changes as the spot price moves:
Spot Price$100
$70$130
Strike: $100 - hover over the chart to move spot price
Call Option
ATM
At the strike
Put Option
ATM
At the strike
Examples
BTC at $100,000:
| Strike | Call Moneyness | Put Moneyness |
|---|---|---|
| $90,000 | ITM (+$10k intrinsic) | OTM |
| $100,000 | ATM | ATM |
| $110,000 | OTM | ITM (+$10k intrinsic) |
Why It Matters
- ITM options cost more (they have intrinsic value built in)
- OTM options are cheaper but need the price to move to pay off
- ATM options have the most time value and are most sensitive to volatility
Common Misconceptions
| Misconception | Reality |
|---|---|
| "OTM = worthless" | OTM options have time value before expiry |
| "ITM = profitable" | You might still lose money if you paid more than intrinsic value |
| "ATM = exactly at strike" | ATM typically means the strike closest to spot |
Related:
- Option Valuation - How intrinsic value is calculated
- Lesson 2: Calls, Puts, Moneyness - Full explainer with examples