Options Glossary

Glossary: Out of the Money

Last Updated: July 12, 2015

Glossary

Out of the Money

What Does Out of the Money Mean in Options Trading?

An option is 'out of the money' in two different scenarios: First, a call option is out of the money when the contract has a strike price higher than the current market price of the underlying stock. Second, an Out of The Money put has a strike lower than the current market price of the underlying stock. An Out of the money option's premium has no intrinsic value and therefore the premium consists exclusively of time value.

Same Terms Found in OptionAutomator’s Content:

Why does implied volatility vary with option strike price?
Slightly OTM Put Calendar
A premade strategy looking for stocks that have recently had a run-up in price and are due for a slight pull-back and expansion in volatility.
Low Vol OTM Short Put Calendars
Looking for low volatility short put calendars with a large run-up resulting in low volatility and therefore presenting opportunity for a pullback with vol expansion suitable for a OTM Put Calendar.
Out of The Money (OTM) Put Calendar
Out of The Money (OTM) Call Calendar
75% and Higher Percentile Slope
Underlying stocks and ETFs demonstrating current 1y Percentile Slope greater than 75% (very high slope). Good for setups that sell OTM options.
25% and Lower Percentile Slope
Underlying stocks and ETFs demonstrating current 1y Percentile Slope lower than 25% (very low slope). Good for setups that buy OTM options.
Moneyness
Moneyness returns one of three labels that can be used for filters: 0) OTM 1) ATM 2) ITM
Probability OTM
Probability of being Out of The Money (OTM) at expiration
Slope Percentile (1y)
The current slope compared to the high-low range from the past year. Slope is the best-fit straight line through the strike volatilities tangent to the 50-delta. It gives us an indication of the price of out of the money options vs. in-the-money. A high relative slope is ideal when selling OTM options and should be avoided when buying OTM and selling ITM.

Related Options Trading Terms:

Moneyness

Glossary: Out of the Money

Out of the Money

What Does Out of the Money Mean in Options Trading?

Related Options Trading Terms

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