Out of the money

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Revision as of 15:31, 6 September 2016 by imported>Doug Williamson (Expand and add link. Source: The Treasurer, September 2016, p42.)
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(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.


See also