Ads end in 20 seconds
This content is free thanks to our sponsors
Sponsored Ad – I may earn a commission if you click and buy
Investment
Out-of-the-Money
An option that would not be profitable to exercise right now because the stock price is on the wrong side of the strike price.
Out-of-the-money options are cheaper but riskier. They require a bigger move in the stock price to become profitable. Traders buy them when they expect a large price swing.
It's a lottery ticket where the winning numbers haven't come up yet.
Real world: A call option with a £100 strike when the stock is at £92 is out-of-the-money. It has no intrinsic value but still has time value and volatility value in case the stock rises before expiry.
💡 Out-of-the-money options are long shots — cheap but you need a big move to win.