out of the money
An option with no value. A call option is out of the money when the strike or exercise price is above the price of the underlying security. Similarly a put option is out of the money when the exercise price is below the price of the underlying security.
Related links
+ out of the money
USA
Reflecting a balance owed (though not necessarily due) from one party to another. Commonly used in a variety of contexts. In swaps and derivatives, a trade is, or a group of trades are, described as being out of the money to the party that has accrued a negative net balance.
For example, parties to an ISDA agreement do not typically settle their trades on a daily or even weekly or monthly basis. Rather, the parties run debit and credit balances with one another (usually backed by the daily or weekly exchange of collateral). When the aggregate value of all trade positions under a particular trade or group of trades is negative for a party, that party is said to be out of the money on that trade or group of trades.
This term is also commonly used in the context of options. In a situation where the exercise or strike price for an option is:
• In the case of a call option, above the market price of the asset or commodity underlying the option, which would not permit the party exercising the call option to buy the underlying asset or commodity at a lower price and sell it at the (higher) market price for a profit, such option is out of the money to that party.
• In the case of a put option, below the market price of the asset or commodity underlying the option, which would not permit the party exercising the put option to sell the underlying asset or commodity at a higher price and buy it at the (lower) market price for a profit, such option is out of the money to that party.
Related terms
in the money

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

Look at other dictionaries:

  • out-of-the-money — An option with no value. A call option is out of the money when the strike or exercise price is above the price of the underlying security. Similarly a put option is out of the money when the exercise price is below the price of the underlying… …   Law dictionary

  • out of the money — The situation where an option has only time value as opposed to intrinsic value because of the relationship between the option s strike price and the current market price for the underlying instrument, the spot price. A call option is out of the… …   Financial and business terms

  • out-of-the-money — A call is out of the money when the strike price is above the underlying futures price. A put is out of the money when the strike price is below the underlying futures price. The CENTER ONLINE Futures Glossary The situation where an option has… …   Financial and business terms

  • Out-of-the-money option — A call option is out of the money if the strike price is greater than the market price of the underlying security. A put option is out of the money if the strike price is less than the market price of the underlying security. The New York Times… …   Financial and business terms

  • out-of-the-money option — An option with no intrinsic value, i.e., a call whose strike price is above the current futures price or a put whose strike price is below the current futures price. Chicago Board of Trade glossary A call option is out of the money if the strike… …   Financial and business terms

  • Out Of The Money - OTM — 1. For a call, when an option s strike price is higher than the market price of the underlying asset. 2. For a put, when the strike price is below the market price of the underlying asset. Basically, an option that would be worthless if it… …   Investment dictionary

  • Deep Out Of The Money — An option with a strike price that is significantly above (for a call option) or below (for a put option) the market price of the underlying asset. To be deemed deep out of the money, an option s strike price should be at least one strike price… …   Investment dictionary

  • deep out-of-the-money — Used to describe an option that is unlikely to go into the money prior to expiration. An arbitrary term. The CENTER ONLINE Futures Glossary …   Financial and business terms

  • Out of the question — Out Out (out), adv. [OE. out, ut, oute, ute, AS. [=u]t, and [=u]te, [=u]tan, fr. [=u]t; akin to D. uit, OS. [=u]t, G. aus, OHG. [=u]z, Icel. [=u]t, Sw. ut, Dan. ud, Goth. ut, Skr. ud. [root]198. Cf. {About}, {But}, prep., {Carouse}, {Utter}, a.]… …   The Collaborative International Dictionary of English

  • Out of the way — Out Out (out), adv. [OE. out, ut, oute, ute, AS. [=u]t, and [=u]te, [=u]tan, fr. [=u]t; akin to D. uit, OS. [=u]t, G. aus, OHG. [=u]z, Icel. [=u]t, Sw. ut, Dan. ud, Goth. ut, Skr. ud. [root]198. Cf. {About}, {But}, prep., {Carouse}, {Utter}, a.]… …   The Collaborative International Dictionary of English

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.