What is Out of the Money (OTM)?

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Accepted Answer

**Out of the Money (OTM)** is the classification for an options contract that possesses zero intrinsic value because the underlying asset's current market price is unfavorable for immediate exercise; specifically, a call option is OTM when the underlying price is below the strike price, and a put option is OTM when the underlying price is above the strike price.

Out of the Money (OTM)

What is Out of the Money (OTM)?

What are the specific conditions that define an Out of the Money (OTM) option for both calls and puts, and how does this status impact its intrinsic value?

How do professional FX traders utilize Out of the Money (OTM) options for cost-effective hedging and speculative strategies in volatile currency markets?

Why do Out of the Money (OTM) options carry a higher risk-reward profile compared to At the Money (ATM) or In the Money (ITM) contracts?

When should a trader consider selling or writing Out of the Money (OTM) options, and what are the associated premium decay dynamics?

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