"at the money" (ATM),

-

 

Options Workshop



When an option is "at the money" (ATM), it means the strike price of the option is approximately equal to the current market price of the underlying asset. In other words, there is no intrinsic value in the option at that moment, but it still has time value and the potential to become in the money (ITM) or out of the money (OTM) before expiration. Let's look at examples for both call and put options:


  1. At the Money Call Option (ATM Call):


Suppose you have a call option to buy 100 shares of Company XYZ with a strike price of $50, and the current market price of Company XYZ stock is also $50.

In this case, the call option is considered at the money, because the strike price is equal to the current market price. There is no intrinsic value in the option.

However, the option still has time value, and factors influence its value such as volatility, time remaining until expiration, and interest rates. If the stock price moves above $50, the call option can become in the money (ITM).


  • At the Money Put Option (ATM Put):


Let's say you have a put option to sell 100 shares of Company ABC with a strike price of $50, and the current market price of Company ABC stock is also $50.

The put option is at the money, because the strike price is equal to the current market price. There is no intrinsic value in the option at this moment.

Similar to the call option, the put option still has time value and can potentially become in the money (ITM) if the stock price falls below $50.

In both cases, when an option is at the money, it means the option's strike price is essentially on par with the current market price of the underlying asset. The option's value primarily consists of time value and can fluctuate based on market conditions and the passage of time. Traders often use at-the-money options to speculate on price movements in the underlying asset, because they have a balance of time value and the potential to become profitable if the market moves in the desired direction.

Comments

Post a Comment

Popular posts from this blog

A slump in technology companies

-
Image
 We did not lose due to options and heging stocks values. Was a solid day please join us. A slump in technology companies' shares weighed on the S&P 500 Friday, chipping away at the recent gains of the broad-market benchmark and pushing it into negative territory for the week.  The S&P fell 1.2%, while the Nasdaq Composite shed 1.6%. The Dow Jones Industrial Average lost about 289 points, or 0.8%. The S&P 500 and Nasdaq posted slim declines for the week, while the Dow eked out a small gain.  U.S. Stocks Decline, Led by Tech Stocks Stocks opened lower and losses accelerated midday, with major indexes ending the day near session lows. Tech stocks, the market’s stars this year, were some of the worst performers. The S&P 500’s information technology sector lost almost 2%, dragging the broad stock-market gauge into the red for the week.  Shares of Adobe dropped 4.2% after the company’s earnings Thursday, and were among the biggest market laggards. The swoo...
Read more

How we trurn $1000.00 into $3000.00 .

-
Image
  Short-term trading, also known as day trading or swing trading, involves buying and selling financial instruments within a short time frame to take advantage of price fluctuations. While it is possible to turn $1000.00 into $3000.00 through short-term trading, it's important to note that trading involves risks, and there are no guarantees of profits. Here are some general steps and tips to consider if you decide to pursue short-term trading: Educate Yourself: Gain a solid understanding of financial markets, trading strategies, and risk management. Learn technical analysis, chart patterns, indicators, and fundamental analysis. Set Realistic Goals: Be aware that turning $1000.00 into $3000.00 is an ambitious target and may not be achievable within a short time frame. Set realistic expectations and focus on consistent, steady growth rather than aiming for large returns quickly. Create a Trading Plan: Develop a well-defined trading plan that outlines your goals, risk tolerance, tradi...
Read more

Stocks dropped Friday

-
Image
Click to zoom  Stocks fell Friday, with all three major indexes ending the week in the red. Read the day's   full markets roundup here . Indexes have  come under pressure  as the fighting between Israel and Hamas has intensified. A surge in borrowing costs, with the 10-year Treasury yield recently nearing 5%, has also weighed on markets. The benchmark yield retreated Friday, settling at 4.924%. The Federal Reserve may hold interest rates steady at its next meeting, Chair Jerome Powell  said Thursday , given that higher yields were tightening financial conditions. American Express stock fell, despite the credit-card company reporting record quarterly earnings and revenue. (Here's a  Heard on the Street take on Amex .) Another round of disappointing earnings pressured bank stocks. As of late Friday: Indexes finished lower.  The S&P 500, Nasdaq Composite and Dow Jones Industrial Average were all in the red, including a 1.5% daily decline for the tech-...
Read more