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Status of an Option

The status of an option changes on a daily basis depending upon the market rate of the underlying. To find out the status of the option, the market rate of the underlying is compared with the strike price of the option contract. Accordingly, an Option will fall into any one of the status viz., ITM, ATM, OTM as mentioned below:

In-The-Money – ITM

For a call option, when the underlying stock is trading for more than the option’s strike price, then the call option is said to be In-The-Money (ITM). A put option is In-The-Money when the underlying stock is trading for less than the option’s strike price.

At-The Money – ATM

When the underlying stock is trading at the same level as the option strike price, then the option is said to be At-The-Money (ATM).

Out-of-The Money – OTM

For a call option, when the underlying stock is trading for less than the option’s strike price, then the call option is said to be Out-of-The-Money (OTM). A put option is In-The-Money when the underlying stock is trading for more than the option’s strike price.

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