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Welcome to your source for answers to questions about option concepts, strategies, and terminology. A new question and answer is published each week. To view the Ask the Institute archives, click the "Ask the Institute Archive" link below.
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This week's question:
DATE: October 10, 2014
How do the terms in, at, and out-of-the-money describe the relationship of the strike price of an options to the current stock price?
The terms in, at, and out-of-the-money describe the relative price relationship of different options at a specific point in time. For example, with a stock price of $55, the 50 Call is in-the-money, because its strike price is below the stock price of $55. The 55 Call is considered at-the-money, because its strike price is at the stock price of $55. And, the 60 Call is considered out-of-the-money, because its strike price is above the stock price of $55. To learn more about in, at, and out-of-the-money options, view this segment of "Ask the Institute."