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Moneyness of Options

Depending on strike price and current market value, options are divided in to three categories.

In the Money

Out the Money

At the Money

In the Money Options:

If the strike price of a CALL is below the current trading value, we call that as ‘In The Money’ Option call.

Eg: strike price – Nifty 5600 CE and current trading value is 5650

If the strike price of a PUT is abovethe current trading value, we call that as ‘Our The Money’ Option Put.

Eg: strike price – Nifty 5700 PE and current trading value is 5650

Out the Money Options:

If the strike price of a CALL is above the current trading value, we call that as ‘In The Money’ Option call.

Eg: strike price – Nifty 5700 CE and current trading value is 5650

If the strike price of a PUT is below the current trading value, we call that as ‘Our The Money’ Option Put.

Eg: strike price – Nifty 5600 PE and current trading value is 5650

At the Money Options:

If the strike price of a CALL is at or near the current trading value, we call that as ‘At The Money’ Option call.

Eg: strike price – Nifty 5600 CE and current trading value is 5602

If the strike price of a PUT is at or near the current trading value, we call that as ‘At The Money’ Option Put.

Eg: strike price – Nifty 5600 PE and current trading value is 5605

NOTE: PREMIUM OF CALLS INCREASE WITH HIGHER STRIKE PRICES AND PREMIUM OF PUTS INCREASE WITH DECREASE OF STRIKE PRICES

Assume nifty is trading around 5590 and observe the sequencial increase and decrease of premiums for nifty calls – puts (nifty options).

ITM – IN THE MONEY

OUT – OUT THE MONEY

ATM – AT THE MONEY

5000 CE – 0.5 (ITM) 5000 PE – 344 (OTM)

5100 CE – 5 (ITM) 5100 PE – 286 (OTM)

5200 CE – 13 (ITM) 5200 PE – 244 (OTM)

5300 CE – 25 (ITM) 5300 PE – 197 (OTM)

5400 CE – 40 (ITM) 5400 PE – 162 (OTM)

5500 CE – 66 (ITM) 5500 PE – 120 (OTM)

5600 CE – 98 (ATM) 5600 PE – 88 (ATM)

5700 CE – 127 (OTM) 5700 PE – 55 (ITM)

5800 CE – 169 (OTM) 5800 PE – 32 (ITM)

5900 CE – 206 (OTM) 5900 PE – 18 (ITM)

6000 CE – 258 (OTM) 6000 PE – 1.2 (ITM)

Posted By: Pankaj                 Posted on: 2016-07-07 14:55:29                 Updated on: 2016-07-07 15:09:24