What is moneyness?

An important aspect of options trading, it describes the relationship between the strike price of an option and the current trading price of its underlying asset such as a stock.

Where have you heard about moneyness?

You’ve probably heard the terms 'in the money', 'at the money' and 'out of the money' before. In trading, they’re used to describe the moneyness of options contracts, which change between these states when the price of the underlying security moves.

What you need to know about moneyness.

Moneyness gives you an indication of whether or not to exercise your stock options. Exercising is when you purchase the issuer’s common stock at the price set by the option.

• In the money means you stand to gain by exercising the option. A call option is in the money when its strike price is below the current trading price of the underlying asset. A put option is in the money when its strike price is above the current trading price of the underlying asset.
• Out of the money means you stand to suffer profit losses.
• At the money means you stand to break even.

Find out more about moneyness.

Options are split into 3 different groups – 'in the money', 'at the money' or 'out of the money'.