Business Glossary

term used to describe an option whose strike price for a stock is either higher than the current market value, in the case of a call, or lower, in the case of a put . For example, an XYZ December 60 call option would be out of the money when XYZ stock was selling for $55 a share. Similarly, an XYZ December 60 put option would be out of the money when XYZ stock was selling for $65 a share.

Someone buying an out-of-the-money option hopes that the option will move in the money, or at least in that direction. The buyer of the above XYZ call would want the stock to climb above $60 a share, whereas the put buyer would like the stock to drop below $60 a share.

option contract on a stock whose current market price is above the striking price of a call option or below the striking price of a put option. A call option on XYZ at a striking price of 100 would be in the money if XYZ were selling for 102, for instance, and a put option with the same striking price would be in the money if XYZ were selling for 98.

call option whose exercise price is well below the market price of the underlying stock (deep in the money) or well above the market price (deep out of the money). The situation would be exactly the opposite for a put option. The premium for buying a deep-in-the-money option is high, since the holder has the right to purchase the stock at a striking price considerably below the current price of the stock. The premium for buying a deep-out-of-the-money option is very small, on the other hand, since the option may never be profitable.

term used to describe an option whose strike price for a stock is either higher than the current market value, in the case of a call, or lower, in the case of a put . For example, an XYZ December 60 call option would be out of the money when XYZ stock was selling for $55 a share. Similarly, an XYZ December 60 put option would be out of the money when XYZ stock was selling for $65 a share.

Someone buying an out-of-the-money option hopes that the option will move in the money, or at least in that direction. The buyer of the above XYZ call would want the stock to climb above $60 a share, whereas the put buyer would like the stock to drop below $60 a share.

option contract on a stock whose current market price is above the striking price of a call option or below the striking price of a put option. A call option on XYZ at a striking price of 100 would be in the money if XYZ were selling for 102, for instance, and a put option with the same striking price would be in the money if XYZ were selling for 98.