Out of the money

(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.

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

• At the money
• Credit support annex
• In the money