Options Basics
What is At-the-Money (ATM)?
An option with a strike price equal or very close to the current stock price.
📖 Complete Definition
An at-the-money option has a strike price equal to or very close to the current stock price. ATM options have roughly 0.50 delta, highest gamma, highest theta, and highest vega. They offer a balance between cost and probability of profit. ATM options are often used as a reference point for pricing and strategy construction.
💡 Examples
- →If AAPL trades at $175, the $175 strike options are ATM
- →ATM options have about 50/50 chance of expiring in or out of the money
❓ Frequently Asked Questions
Why do ATM options have the highest time value?
ATM options have maximum uncertainty about whether they'll expire ITM or OTM, so the time value component (reflecting this uncertainty) is highest.
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