At-the-Money

At-the-money options have little or no intrinsic value. Their price is made up almost entirely of time value, which reflects the chance of the underlying asset moving in the option holder's favour before expiry.

For example, if a share trades at 50, both a call and a put with a strike price of 50 are at the money. If the share is at 50.30, options with a 50 strike are often still described as at the money, or near the money.

At-the-money options usually have the highest time value of any strike price, because there is the greatest uncertainty about whether they will end up in or out of the money. Their price changes by roughly half as much as the underlying asset for small moves, because there is about an equal chance of the option finishing profitably or not.

Traders often use at-the-money options in strategies designed to profit from large price movements in either direction, such as straddles, or to earn premium income by selling options when they expect little movement. Their prices are also widely used to measure the market's expected volatility.