11.22What is ATM (At the Money)?
1What is it?
An option is at the money when its strike is equal (or closest) to the current price.
2Why does it exist?
ATM options have the most time value and are the most actively traded.
3Stock market example
Nifty at 25,010: the 25,000 strike is ATM.
4Quick revision
- Strike ≈ spot.
- Highest time value.
5Knowledge check
Q1. Spot 24,980: which strike is ATM?Show answer
25,000 (nearest).
Q2. Intrinsic value of an exact ATM option?Show answer
Zero.
Q3. Which options have most time value?Show answer
ATM.