At-the-Money (ATM) refers to an option where the market price of the underlying asset is very close to or exactly equal to the strike price. ATM options usually have the highest time value and are sensitive to small movements in the underlying price.
- ATM Call/Put: When the underlying price is ≈ strike price.
- Highest Time Value: ATM options carry maximum time value.
- Neutral Position: Very little intrinsic value but highly sensitive to price moves.
- Quick Sensitivity: Small changes push ATM into ITM or OTM.
- Preferred for Short-Term Trading: Useful for quick strategies.
Example:
- Call: NIFTY at 17,700 → 18000 Call is OTM (market below strike).
- Put: NIFTY at 18,300 → 18000 Put is OTM (market above strike).