What Does Out-of-the-Money Mean? - TheStreet Definition

Dictionary of Financial Terms

(Opposite of in-the-money.) In the case of a call, this describes when the strike price of the option exceeds the share price of the underlying equity. The idea is that at this point, your call has no intrinsic value (meaning that if you exercised it, you would be losing money on the trade).

In the case of a puts, when the strike price of the option is less than the share price of the underlying equity.

Out-of-the-money call activity is often an indicator of insiders buying and selling or well-founded rumors. For example, if ABC stock is trading at 50, any call option series above 50 is considered out-of-the-money. If ABC stock is trading at 50, any put option below 50 is considered out-of-the-money.

The theory is that if someone is willing to pay for that stuff, they must know something.

Definitions of Financial Terms

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