Finance: What are At the Money, In the Money, Deep in the Money, and Out of the Money?

What are At the Money, In the Money, Deep in the Money, and Out of the Money? At the money happens when a stock is trading at an option’s strike price, so the call or put price matches the actual price of the stock. In the money means that options are valuable, so a call strike price is lower than the trading price and a put strike price is higher than the trading price; if it’s deep in the money, the call strike price is much lower than the trading price and the put strike much is much higher than the trading price. Out of the money is the opposite. Options are not valuable if they are out of the money because call strike prices are higher than the trading price and put strike prices are lower than the trading price.

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Transcript

00:22

the money means that stock prices match the strike price

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of the stock options that an investor has bought So

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if you have the right to buy a share of

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fifty bucks and then the share actually is at fifty

00:37

bucks when you go to buy well that share is

00:40

at the money at the money for the strike price

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of the option example Time left Joe schmoe has paid

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three bucks for the right to buy a share of

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ko that's coke for eighty dollars The option expires in

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a week and the stock is at seventy six bucks

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a share today If the stock climbs eighty dollars a

01:00

share ieave bidwell then it is said to be at

01:03

the money or at the strike price If it climbs

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above eighty Well then it's in the money like it

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was eighty for it would be four dollars in the

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money And if it was like one hundred dollars would

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be twenty dollars in the money And well a lot

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less volatile because you know you're going to make money

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and sell it if it's below eighty bucks well it's

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out of the money and said to be under water

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out of the money honey it's Not a good thing

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Note that ko could be eighty two fifty and the

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call option buyer has still lost money on the trade

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because from the call option buyer paid three dollars for

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the call and ko ended up being on ly two

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fifty in the money So if the buyer lost half

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a buck on that trade now the buyer can't afford 00:01:47.606 --> [endTime] to buy anything Not even a vow Well