Out of the money: Difference between revisions
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imported>Doug Williamson m (Spacing 21/8/13) |
imported>Doug Williamson (Expand and add link. Source: The Treasurer, September 2016, p42.) |
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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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* [[At the money]] | * [[At the money]] | ||
* [[Credit support annex]] | * [[Credit support annex]] | ||
* [[Delta]] | |||
* [[In the money]] | * [[In the money]] | ||
Revision as of 15:31, 6 September 2016
(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.
