- "In the money" redirects here; for the poker term, see In the money (poker).
In finance, moneyness is a measure of the degree to which a derivative is likely to have positive monetary value at its expiration, in the risk-neutral measure. It can be measured in percentage probability, or in standard deviations. Image File history File links This is a lossless scalable vector image. ...
In the money, or ITM, is a term given in poker, which describes a players placement in a tournament. ...
The field of finance refers to the concepts of time, money and risk and how they are interelated. ...
Derivatives traders at the Chicago Board of Trade. ...
Intrinsic value and time value
The intrinsic value (or "monetary value") of an option is the value of exercising it now. Thus if the current (spot) price of the underlying security is above the agreed (strike) price, a call has positive intrinsic value (and is called "in the money"), while a put has zero intrinsic value. The spot price of a commodity or a security or a currency is the price that is quoted for settlement (payment and delivery) of the transaction immediately. ...
This article is about financial options. ...
A put option (sometimes simply called a put) is a financial contract between two parties, the buyer and the writer of the option. ...
The time value of an option is a function of the value less the intrinsic value. It equates to uncertainty in the form of investor hope. It is also viewed as the value of not exercising the option immediately. In the case of a European option, you cannot choose to exercise it at any time, so the time value can be negative; for an American option if the time value is ever negative, you exercise it: this yields a boundary condition. Option Value In finance, the value of an option consists of two components, its intrinsic value and its time value. ...
ATM: At-the-money An option is at-the-money if the strike price, i.e., the price the option holder must pay to exercise the option, is the same as the current price of the underlying security on which the option is written. An at-the-money option has no intrinsic value, only time value. This article is about options traded in financial markets. ...
The strike price, or exercise price, is a key variable in a derivatives contract between two parties. ...
ITM: In-the-money An in-the-money option has positive intrinsic value as well as time value. A call option is in-the-money when the strike price is below the current trading price. A put option is in-the-money when the strike price is above the current trading price. Another characteristic of In-the-money options is that when the current price is much higher than the strike price, for a call option, this option behaves like the underlying security because the probability of exercise is very high.
OTM: Out-of-the-money An out-of-the-money option has no intrinsic value. A call option is out-of-the-money when the strike price is above the current trading price of the underlying security. A put option is out-of-the-money when the strike price is below the current trading price of the underlying security.
Spot versus forward | | This section does not cite any references or sources. (June 2008)
Please help improve this section by adding citations to reliable sources. Unverifiable material may be challenged and removed. | Recall that assets have a spot price and a forward price (the price for delivery in future). One can talk about moneyness with respect to either the spot price, or the forward price (at expiry): thus one talks about ATMS = ATM Spot (also called at-the-money outright) vs. ATMF = ATM Forward, and so forth.
For instance, if the spot price for USD/JPY is 120, and the forward price in one year is 110, then a call struck at 110 is ATMF but ITMS.
Which are used? Buying (selling) an ITM option is effectively lending (borrowing) money. Further, an ITM call can be replicated by entering a forward and buying an OTM put (and conversely). Thus ATM/OTM options are the main traded ones.
Example Suppose the current stock price of IBM is $100. A call or put option with a strike of $100 is at-the-money (spot). A call option with a strike of $80 is in-the-money (100 – 80 = 20 > 0). A put option with a strike at $80 is out-of-the-money (80 – 100 = –20 < 0). Conversely, a call option with a $120 strike is out-of-the-money and a put option with a $120 strike is in-the-money. For other uses, see IBM (disambiguation) and Big Blue. ...
This article is about financial options. ...
A put option (sometimes simply called a put) is a financial contract between two parties, the buyer and the writer of the option. ...
This article is about financial options. ...
A put option (sometimes simply called a put) is a financial contract between two parties, the buyer and the writer of the option. ...
When one uses the Black-Scholes model to value the option, one may define moneyness quantitatively. If we define the moneyness (of a call) as The Black-Scholes model, often simply called Black-Scholes, is a model of the varying price over time of financial instruments, and in particular stocks. ...
 where d1 and d2 are the standard Black-Scholes parameters then  where T is the time to expiry.
In other words, it is the number of standard deviations the current price is above the ATMF price. In probability and statistics, the standard deviation is the most commonly used measure of statistical dispersion. ...
This choice of parameterisation means that the moneyness is zero when the forward price of the underlying, discounted at the risk-free rate, equals the strike price. Such an option is often referred to as at-the-money-forward. Moneyness is measured in standard deviations from this point, with a positive value meaning an in-the-money call option and a negative value meaning an out-of-the-money call option (with signs reversed for a put option). The strike price, or exercise price, is a key variable in a derivatives contract between two parties. ...
One can also measure it as a percent, via Φ(m), where Φ is the standard normal cumulative distribution function; thus a moneyness of 0 yields a 50% probability of expiring ITM, while a moneyness of 1 yields an approximately 84% probability of expiring ITM. The normal distribution, also called Gaussian distribution, is an extremely important probability distribution in many fields, especially in physics and engineering. ...
In probability theory, the cumulative distribution function (abbreviated cdf) completely describes the probability distribution of a real-valued random variable, X. For every real number x, the cdf is given by where the right-hand side represents the probability that the random variable X takes on a value less than...
Beware that (percentage) moneyness is close to but different from Delta:  instead of Φ(m), for a call (conversely for a put).
Thus a 25 Delta call option has approximately (but not exactly) 25% moneyness.
Note that r is the risk-free rate, not the expected return on the underlying. The risk-free interest rate is the interest rate that it is assumed can be obtained by investing in financial instruments with no risk. ...
References - McMillan, Lawrence G. (2002). Options as a Strategic Investment, 4th ed., New York : New York Institute of Finance. ISBN 0-7352-0197-8.
- Read More About Options Moneyness At, OptionTradingpedia.com
| Derivatives market | | | Derivative (finance) | | | Options | Terms: Strike price · Expiration · Volatility · Open interest · Pin risk
The derivatives markets are the financial markets for derivatives. ...
Derivatives traders at the Chicago Board of Trade. ...
This article is about options traded in financial markets. ...
The strike price, or exercise price, is a key variable in a derivatives contract between two parties. ...
For an option contract, expiration is the date on which the contract expires. ...
Volatility most frequently refers to the standard deviation of the change in value of a financial instrument with a specific time horizon. ...
Open interest is the number of open contracts of derivatives like futures and options that have a time limit after which they expire. ...
Pin risk occurs when the underlier of an option contract settles close to the options strike value at expiration. ...
Vanilla options: Option styles · Call · Put · Warrants · Fixed income · Employee stock option · FX
In finance, a vanilla option is a type of derivative security. ...
In finance, the style or family of an option is a general term denoting the class into which the option falls, usually defined by the dates on which the option may be exercised. ...
This article is about financial options. ...
A put option (sometimes simply called a put) is a financial contract between two parties, the buyer and the writer of the option. ...
For other uses of the term Warrant, see Warrant (disambiguation) In finance, a warrant is a security that entitles the holder to buy stock of the company that issued it at a specified price, which is much higher than the stock price at time of issue. ...
This article does not cite any references or sources. ...
An employee stock option is a call option on the common stock of a company, issued as a form of non-cash compensation. ...
In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. ...
Exotic options: Asian · Lookback · Barrier · Binary · Swaption · Mountain range
In finance, an exotic option is a derivative which has features making it more complex than commonly traded products (vanilla options). ...
The style or family of a financial option is a general term denoting the class into which the option falls, usually defined by the manner in which the option may be exercised. ...
The style or family of a financial option is a general term denoting the class into which the option falls, usually defined by the manner in which the option may be exercised. ...
A barrier option is a type of financial option where the option to exercise depends on the underlying crossing or reaching a given barrier level. ...
A binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. ...
To meet Wikipedias quality standards, this article or section may require cleanup. ...
Mountain ranges are exotic options originally marketed by Société Générale in 1998. ...
Options strategies: Covered call · Naked put · Collar · Straddle · Strangle · Butterfly · Iron condor
An option strategy is implemented by combining one or more option positions and possibly an underlying stock position. ...
Payoffs and profits from buying stock and writing a call. ...
A naked put is a put option where the option writer does not have a short position in the stock. ...
A collar is an investment strategy that uses options to limit the possible range of positive or negative returns on an investment in an underlying asset to a specific range. ...
In finance, a straddle is an investment strategy involving the purchase or sale of particular derivatives. ...
In finance, a strangle is an investment strategy involving the purchase or sale of particular option derivatives that allows the holder to profit based on how much the price of the underlying security moves, with relatively minimal exposure to the direction of price movement. ...
In options trading, a butterfly is a combination trade resulting in the following net position: Long 1 call at (X - a) strike Short 2 calls at X strike Long 1 call at (X + a) strike all with the same expiration date. ...
Options spreads: Bull spread · Bear spread · Calendar spread · Vertical spread · Debit spread · Credit spread
“Spread option†redirects here. ...
In options trading, a bull spread is a spread position that is designed to profit from a rise in the price of the underlying security. ...
In options trading, a bear spread is a spread position that is designed to profit from a drop in the price of the underlying security. ...
There are very few or no other articles that link to this one. ...
The introduction to this article provides insufficient context for those unfamiliar with the subject matter. ...
In finance, a debit spread, AKA net debit spread, results when an investor simultaneously buys an option with a higher premium and sells an option with a lower premium. ...
In finance, a credit spread, or net credit spread, involves a purchase of one option and a sale of another option in the same class and expiration. ...
Valuation of options: Moneyness · Option time value · Put-call parity · Black-Scholes · Black · Binomial · Simulation Option contracts are complex to value. ...
Option Value In finance, the value of an option consists of two components, its intrinsic value and its time value. ...
In financial mathematics, put-call parity defines a relationship between the price of a European call option and a European put option - both with the identical strike price and expiry. ...
The Black-Scholes model, often simply called Black-Scholes, is a model of the varying price over time of financial instruments, and in particular stocks. ...
The Black model (sometimes known as the Black-76 model) is a variant the Black-Scholes option pricing model. ...
In finance, the binomial options pricing model provides a generalisable numerical method for the valuation of options. ...
A Monte Carlo model, in its most general description, includes any method of estimating a value by the random generation of numbers and statistical principles. ...
| | | Swaps | Interest rate swap · Total return swap · Equity swap · Credit default swap · Forex swap · Currency swap · Constant maturity swap · Basis swap · Volatility swap · Variance swap For the Thoroughbred horse racing champion, see: Swaps (horse). ...
An interest rate swap is a derivative in which one party exchanges a stream of interest payments for another partys stream of cash flows. ...
Total return swap, or TRS (especially in Europe), or total rate of return swap, or TRORS, is a contract in which one party receives interest payments on a reference asset, plus any capital gains and losses over the payment period, while the other receives a specified fixed or floating cash...
An equity swap, a branch of derivative security, is a swap in which at least one party pays the return on a stock or stock index. ...
A credit default swap (CDS) is a bilateral contract under which two counterparties agree to isolate and separately trade the credit risk of at least one third-party reference entity. ...
Forex swap is an over the counter short term interest rate derivative instrument. ...
A currency swap is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped. ...
Constant Maturity Swaps are used in the financial markets to have a reference yield curve. ...
A basis swap is an interest rate swap which involves the exchange of two floating rate financial instruments denominated in the same currency. ...
In finance, a volatility swap is a forward contract on the future realised volatility of a given underlying asset. ...
A variance swap is a financial derivative whose payoff is the realised volatility squared of the underlier based on a prespecified set of sampling points. ...
| | | Other derivatives | Credit derivative · Equity derivative · Interest rate derivative · Inflation derivatives // A credit derivative is a financial instrument or derivative (finance) whose price and value derives from the creditworthiness of the obligations of a third party, which is isolated and traded. ...
The term equity derivative describes a class of financial instruments whose value is at least partly derived from one or more underlying equity securities. ...
To meet Wikipedias quality standards, this article may require cleanup. ...
Inflation Derivatives or inflation-indexed derivatives refer to OTC and exchange traded derivatives that are used to transfer inflation risk from one counterparty to another. ...
| | |
Feeds |
Contact