At the money definition

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At the money is a term used in options trading, used to define the proximity of an underlying asset’s price to the figure at which it can be bought or sold (known as its strike price). This is also referred to as its ‘moneyness’.

When the price of the underlying asset in an option is equal to its strike price, it is at the money. If it has not yet reached that point, it is out of the money, and if it has exceeded it then is in the money. As such, an option that is at the money has no intrinsic value at that current time, and will incur a loss if exercised because of the premium paid for the option.

However, at the money options see a lot of trading activity, because they are so close to becoming profitable.

At the money example

If Apple is trading at $12 and a call option has the strike price of $12, then that option is at the money. If it rises beyond this point it will be in the money, but if it falls it will once again become out of the money, and cannot be exercised. 

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