Posted in Finance, Accounting and Economics Terms, Total Reads: 824
At-the-money is a term that is widely used with regards to the derivative contracts or more precisely with options contracts.
An option is said to be at-the-money if the market value of the underlying security is equal to the strike price. Ideally, without considering any option premium, a person does not have a gain or a loss when an option is at-the-money while practically, with the premium involved, the option holder would incur a loss.
Consider a call option for 1 ton of steel with the strike price of Rs. 20/kg. If the market price of steel is equal to the strike price i.e. Rs. 20/kg, the option is said to be at-the-money.