At the money definition (2024)

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CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.
CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

What is at the money?

At the money (ATM) is a term used to describe an options contract with a strike price that is identical to the underlying market price. At the money options see a lot of trading activity, because they are so close to becoming profitable.

At the money options have no intrinsic value and will incur a loss if exercised due to the premium paid for the option. However, ATM is the point at which the option will start to have an intrinsic value.

In options trading, there are three ways to describe an option’s ‘moneyness’: out of the money, at the money and in the money. When the price of the underlying asset in an option is equal to its strike price, it is at the money. If it has not yet reached that point, it is out of the money, and if it has exceeded it then is in the money. These terms apply to both call options and put options.

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Example of at the money

Let’s say a trader decides to buy a call option with a strike price of $12. Once the current market price is also $12, then the option is at the money. If it rises beyond this point the option will be in the money, as it now has a value, but if it falls it will be out of the money and cannot be exercised.

If the trader decides to buy a put option with a strike price of $12 instead, it would still be considered at the money if the market price was $12. However, it would only be in the money if the underlying asset’s price fell beyond this point, but if the market rose it would be out of the money.

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^IG International Limited is part of the IG Group and its ultimate parent company is IG Group Holdings Plc. IG Group established in London in 1974, and is a constituent of the FTSE 250 index.

The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 70% of retail client accounts lose money when trading CFDs, with this investment provider. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money.

CFD Accounts provided by IG International Limited. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority.

IG provides an execution-only service. The information in this site does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of or solicitation for transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.

The information on this site is not directed at residents of the United States and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

IG International Limited is part of the IG Group and its ultimate parent company is IG Group Holdings Plc. IG International Limited receives services from other members of the IG Group including IG Markets Limited.

At the money definition (2)

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At the money definition (2024)
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