Question

you have just purchased the options listed below. based on the information given, indicate whether the option is in the money, out of the money, or at the money, whether you would exercise the option if it were expiring today, what the dollar profit would be, and what the percentage return would be

Answer 1

Out of the money is also known as OTM, meaning an option has no intrinsic value, only extrinsic value. A call option is OTM if the underlying price is trading below the strike price of the call.

What the money, out of the money, or at the money?

Instances where the strike price for a call is higher than the market price or for a put is lower than the market price. Professional traders can eliminate risk by exercising OTM options at expiration.

However, if you anticipate a modest gain, at-the-money or in-the-money options are your best bets.

Out-of-the-the-money options perform better when the price of the underlying stock rises significantly. The time horizon, which is important for bullish investors, must be well-defined.

Therefore, A put option is OTM if the underlying's price is above the put's strike price.

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