what is at the money atm 
at the money atm is a situation where an option s strike price is identical to the current market price of the underlying security an atm option has a delta of 0 50 positive if it is a call negative for a put both call and put options can be simultaneously atm for example if xyz stock is trading at 75 then the xyz 75 call option is atm and so is the xyz 75 put option atm options have no intrinsic value but will still have extrinsic or time value prior to expiration and may be contrasted with either in the money itm or out of the money otm options understanding at the money atm at the money atm sometimes referred to as on the money is one of three terms used to describe the relationship between an option s strike price and the underlying security s price also called the option s moneyness options can be in the money itm out of the money otm or atm itm means the option has intrinsic value and otm means it doesn t simply put atm options are not in a position to profit if exercised but still have value there is still time before they expire so they may yet end up itm the intrinsic value for a call option is calculated by subtracting the strike price from the underlying security s current price the intrinsic value for a put option on the other hand is calculated by subtracting the underlying asset s current price from its strike price a call option is itm when the option s strike price is less than the underlying security s current price conversely a put option is itm when the option s strike price is greater than the underlying security s stock price meanwhile a call option is otm when its strike price is greater than the current underlying security s price and a put option is otm when its strike price is less than the underlying asset s current price special considerationsoptions that are atm are often used by traders to construct spreads and combinations straddles for instance will typically involve buying or selling both an atm call and put image by julie bang investopedia 2019atm options are the most sensitive to various risk factors known as an option s greeks atm options have a 0 50 delta but have the greatest amount of gamma meaning that as the underlying moves its delta will move away from 0 50 rapidly and most rapidly as time to expiration nears options trading activity tends to be high when options are atm atm options are the most sensitive to time decay as represented by an option s theta moreover their prices are most responsive to changes in volatility especially for farther maturities and is expressed by an option s vega finally atm options are also most sensitive to changes in interest rates as measured by the rho at the money atm and near the moneythe term near the money is sometimes used to describe an option that is within 50 cents of being atm for example assume an investor purchases a call option with a strike price of 50 50 and the underlying stock price is trading at 50 in this case the call option is said to be near the money in the above example the option would be near the money if the underlying stock price was trading between about 49 50 and 50 50 near the money and atm options are attractive when traders expect a big movement options that are even further otm may also see a jump when a swing is anticipated options pricing for at the money atm optionsan option s price is made up of intrinsic and extrinsic value extrinsic value is sometimes called time value but time is not the only factor to consider when trading options implied volatility also plays a significant role in options pricing similar to otm options atm options only have extrinsic value because they possess no intrinsic value for example assume an investor purchases an atm call option with a strike price of 25 for a price of 50 cents the extrinsic value is equivalent to 50 cents and is largely affected by the passage of time and changes in implied volatility assuming volatility and the price stay steady the closer the option gets to expiry the less extrinsic value it has if the price of the underlying moves above the strike price to 27 the option now has 2 of intrinsic value plus whatever extrinsic value remains 