Quick Definition

Out of the Money (OTM) refers to an options contract where the strike price is less favorable compared to the current market price of the underlying asset, making it unprofitable to exercise.

Examples

• 1A call option with a strike price of $50 on a stock currently trading at $45 is OTM.
• 2A put option with a strike price of $30 on a stock currently trading at $35 is OTM.
• 3An investor buys a call option for a tech stock at a strike price of $100, but the stock's price drops to $90, rendering the option OTM.

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