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Regulations Videos 358 videos

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Finance: What are At the Money, In the Money, Deep in the Money, and Out of the Money? 5 Views


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Description:

What are At the Money, In the Money, Deep in the Money, and Out of the Money? At the money happens when a stock is trading at an option’s strike price, so the call or put price matches the actual price of the stock. In the money means that options are valuable, so a call strike price is lower than the trading price and a put strike price is higher than the trading price; if it’s deep in the money, the call strike price is much lower than the trading price and the put strike much is much higher than the trading price. Out of the money is the opposite. Options are not valuable if they are out of the money because call strike prices are higher than the trading price and put strike prices are lower than the trading price.

Language:
English Language

Transcript

00:00

Finance what are at the money in the money and

00:05

out of the money underwater options Who A mouthful Well

00:10

it sounds like something contestants shout during wheel of fortune

00:14

big money out of money at the money and yeah

00:17

hopefully they're not landing on bankrupt Want long actually at

00:22

the money means that stock prices match the strike price

00:27

of the stock options that an investor has bought So

00:31

if you have the right to buy a share of

00:33

fifty bucks and then the share actually is at fifty

00:37

bucks when you go to buy well that share is

00:40

at the money at the money for the strike price

00:43

of the option example Time left Joe schmoe has paid

00:49

three bucks for the right to buy a share of

00:51

ko that's coke for eighty dollars The option expires in

00:55

a week and the stock is at seventy six bucks

00:57

a share today If the stock climbs eighty dollars a

01:00

share ieave bidwell then it is said to be at

01:03

the money or at the strike price If it climbs

01:07

above eighty Well then it's in the money like it

01:10

was eighty for it would be four dollars in the

01:13

money And if it was like one hundred dollars would

01:15

be twenty dollars in the money And well a lot

01:18

less volatile because you know you're going to make money

01:20

and sell it if it's below eighty bucks well it's

01:23

out of the money and said to be under water

01:27

out of the money honey it's Not a good thing

01:29

Note that ko could be eighty two fifty and the

01:33

call option buyer has still lost money on the trade

01:36

because from the call option buyer paid three dollars for

01:38

the call and ko ended up being on ly two

01:41

fifty in the money So if the buyer lost half

01:44

a buck on that trade now the buyer can't afford 00:01:47.606 --> [endTime] to buy anything Not even a vow Well

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