Out Of The Money

An option is out of the money if it cannot be exercised at a profit given the current price of the underlying asset. If the option is close to expiration and significantly out of the money, it is said to be deep out of the money. An out of the money option can become not only deep out of the money, but also at the money or in the money, if the price of the asset moves favorably relative to the strike price of the option. A call option is out of the money if the strike price is above the market price of the underlying asset. A put option is out of the money if the strike price is below the market price of the underlying asset.