At The Money

At The Money Definition

At the money (ATM) is a situation wherein if the option holder exercises the option, it will result in neither loss nor gain because the exercise price or strike price is equal to the current spot price of the underlying security.

Explanation

At-The-Money

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For eg:
Source: At The Money (wallstreetmojo.com)

Example of At The Money

Difference Between At The money and In The money

Advantages

Disadvantages

  • This situation is more costly as compared to the other two pricing, which the exchange offers.
  • In this type of price, the buyer and the seller are both required to pay a higher commission to enjoy the benefit of the same.
  • Sometimes it becomes difficult for the investors to decide regarding the investment because they cannot identify whether the option will provide gain or loss.
  • The option prices are beneficial to the investors, but they are complicated also. The ATM situation is also the same. They can confuse investors, especially if they are beginners.
  • Practically this type of situation is very rare in the money market when the exercise price and the market price are the same, and no loss or no gain situation arises. Therefore this type of option pricing is rare.

Conclusion

Both the call option buyer and the put optionThe Call Option Buyer And The Put OptionPut Option is a financial instrument that gives the buyer the right to sell the option anytime before the date of contract expiration at a pre-specified price called strike price. It protects the underlying asset from any downfall of the underlying asset anticipated.read more buyer will get the same result in “at the money.” In ATM, the situation is rare in the money market, but when it prevails, it can benefit both the buyer as well as sellers. Investors should carefully analyze the price which the exchange offers. The beginner investors should take extra caution while exercising this option price since it may contain a higher cost. These options are very better options for investors who are very aggressive because they can provide a wide range of stock movements very often.

Recommended Articles

This has been a guide to What is At The Money and its Definition. Here we discuss the key differences between ATM and ITM along with an example, advantages, and disadvantages. You can learn more about from the following articles–