Difference Between InTheMoney (ITM), AtTheMoney (ATM) And OutTheMoney (OTM) Call & Put Options?
18 Aug 2017
Nilesh Jain
An option premium consists of components, namely Intrinsic value and the Time value.
Option premium = Intrinsic value + Time value

ITM 
ATM 
OTM 
INTRINSIC VALUE 
YES 
NO 
NO 
TIME VALUE 
YES 
YES 
YES 
Intrinsic value: The Intrinsic value is the amount by which the strike price of an option is Inthemoney. The Intrinsic value for call option will be the underlying stock’s price minus its call strike price, whereas for the put option, it is the put strike price minus the underlying stock price. ATM and OTM options don’t have any Intrinsic value.
Time Value: The Time value is also referred to as the Extrinsic value. It is the excess amount over and above an option’s intrinsic value. Time value decreases to zero over time as the option moves closer to expiration. This circumstance is called as Time decay. Options premium depends on time to expiration. Options that would expire after a longer duration of time would be more expensive as compared to those expiring in the current month as the former would have more time value left, increasing the probability of trade going in your favour.
InTheMoney Call Option
An Inthemoney call option is described as a call option whose strike price is less than the spot price of the underlying assets.
In the following example of Nifty, the Inthemoney call option would be any strike price below Rs.8300 (spot price) of the stock (i.e. Strike price< Spot price).So, NIFTY FEB 8200 CALL would be the example of Inthemoney call. An Inthemoney option always has some Intrinsic value and Time value.
AtTheMoney Call Option
An Atthemoney call option is described as a call option whose strike price is approximately equal to spot price of the underlying assets (i.e. Strike price=Spot price). Hence, NIFTY FEB 8300 CALL would be an example of Atthemoney call option, where the spot price is Rs 8300. An Atthemoney call option doesn’t have any Intrinsic value and it consists of only time value.
OutTheMoney Call Option
An Outthemoney call option is described as a call option whose strike price is higher than the spot price of the underlying assets(i.e. Strike price> Spot price).Thus, an Outthemoney call option’s entire premium consists of Time value/Extrinsic value and it doesn’t have any Intrinsic value. So, NIFTY FEB 8400 CALL would be an example of Outthemoney call option, where the spot price is Rs 8300.
NIFTY (CALL OPTION) 
Expiry: 23FEB2017 
SPOT PRICE: 8300 
STRIKE PRICE 
STATUS 
OPTION PRICE 
INTRINSIC VALUE 
TIME VALUE 
8000 
ITM 
330 
300 
30 
8100 
ITM 
240 
200 
40 
8200 
ITM 
160 
100 
60 
8300 
ATM 
80 
0 
80 
8400 
OTM 
60 
0 
60 
8500 
OTM 
40 
0 
40 
8600 
OTM 
30 
0 
30 
Inthemoney put option
An Inthemoney put option is described as a put option whose strike price is higher than the current price of the underlying. An Inthemoney option always has some Intrinsic value and Time value.
So, the Inthemoney put option would be any strike price above Rs8300 (spot price) of the stock. And NIFTY FEB 8400 PUT would be the example of Inthemoney put.
Atthemoney put option
An Atthemoney put option is described as a put option whose strike price is approximately equal to the spot price of the underlying assets. From the following example, NIFTY FEB 8300 PUT would be an example of Atthemoney put option, where the spot price is Rs. 8300. An Atthemoney put option doesn’t have any Intrinsic value, it consists of only time value.
Outthemoney put option
An Outthemoney put option is described as a put option whose strike price is lower than the spot price of the underlying. Thus, an Outthemoney put option’s entire premium consists of Time value / Extrinsic value and it doesn’t have any Intrinsic value. So, NIFTY FEB 8200 PUT would be an example of Outthemoney put option.
NIFTY ((PUT OPTION) 
Expiry: 23FEB2017 
SPOT PRICE: 8300 
STRIKE PRICE 
STATUS 
OPTION PRICE 
INTRINSIC VALUE 
TIME VALUE 
8000 
OTM 
30 
0 
30 
8100 
OTM 
40 
0 
40 
8200 
OTM 
60 
0 
60 
8300 
ATM 
80 
0 
80 
8400 
OTM 
160 
100 
60 
8500 
OTM 
240 
200 
40 
8600 
OTM 
330 
300 
30 