Out of the money: Difference between revisions
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An option is out of the money when immediate exercise of the option would result in a loss for the holder of the option. | An option is out of the money when immediate exercise of the option would result in a loss for the holder of the option. | ||
Out of the money options have low deltas. For this reason they are sometimes known as 'low-delta' options. | |||
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== See also == | == See also == | ||
* [[At the money]] | * [[At the money]] | ||
* [[Collateralized to market]] | |||
* [[Credit support annex]] | * [[Credit support annex]] | ||
* [[Delta]] | |||
* [[In the money]] | * [[In the money]] | ||
* [[Settled to market]] | |||
[[Category:Manage_risks]] | |||
Latest revision as of 14:28, 9 September 2020
(OTM).
1.
An option is out of the money when immediate exercise of the option would result in a loss for the holder of the option.
Out of the money options have low deltas. For this reason they are sometimes known as 'low-delta' options.
2.
A derivative such as a swap is out of the money when, for example, the swap rate is unfavourable compared with the current market rate, so that the net present value of the derivative is negative.
