What are ATM, ITM, and OTM in Options? Explained with Real Examples for Indian Traders

Last Updated: 25 Jun 2025

Options trading can be exciting, but only if you know what you’re doing. One of the widely used but misunderstood terms in the world of options is ATM, ITM, and OTM. These three sets of letters hold the secret to how much money you are making or losing on your trades. So if you’re trying to figure out what ATM, OTM, and ITM mean in options, you’ve come to the right place. Understanding these terms allows you to make smarter choices before the expiry date.

What is ITM (In the Money) in Options?

An option is In the Money (ITM) if it already has value. Put simply, it would be profitable if exercised immediately.

Call Option: In The Money (ITM) when the strike price is lower than the current market price of the underlying asset.

For example, if Nifty 50 is trading at ₹22,000, and you own a call option with the strike price of ₹21,800, then you are ITM.

Calculation: ₹22,000 – ₹21,800 = ₹200 (Intrinsic Value)

• Put Option: ITM when the strike price is greater than the current spot price.

E.g., If Nifty 50 is trading at ₹22,000, and you hold a put option with a strike price of ₹22,200, you’re ITM.

Calculation: ₹22,000 – ₹22,200 = -₹200 (But it’s ITM for a Put)

ITM typically means a more expensive options premium, though the opportunity for returns will be higher as well.

What is ATM (At the Money) in Options?

An option is At the Money (ATM) when the strike price is exactly equal to the current spot price of the underlying asset.

• Call Option: ATM when strike = spot
• Put Option: ATM when strike = spot

This is a common state for options as they hover around their intrinsic threshold, especially close to the expiry date. At this point, the options premium is entirely time-based (no intrinsic value).

E.g., Nifty 50 at ₹22,000, strike price = ₹22,000 ⇒ ATM call or put.

What is OTM (Out of the Money) in Options?

An option is said to be Out of the Money (OTM) when it holds no intrinsic value and would lead to a loss if exercised immediately.

• Call Option: OTM when the strike price is higher than the spot price.

E.g., Nifty at ₹22,000 and strike price = ₹22,300 call ⇒ OTM

• Put Option: OTM when the strike price is lower than the spot price.

E.g., Nifty at ₹22,000 and strike price = ₹21,700 put ⇒ OTM

Though cheaper in terms of premium, OTM options are riskier as they need the price to move favourably before expiry.

ITM ATM OTM Example

Let’s assume the spot price of Reliance stock is ₹2,500:

Option Type	Strike Price	Option Status	Reason
Call Option	₹2,400	ITM	Strike < Spot (₹2,500 – ₹2,400)
Call Option	₹2,500	ATM	Strike = Spot
Call Option	₹2,600	OTM	Strike > Spot
Put Option	₹2,600	ITM	Strike > Spot (₹2,600 – ₹2,500)
Put Option	₹2,500	ATM	Strike = Spot
Put Option	₹2,400	OTM	Strike < Spot

This is a straightforward ITM, ATM, OTM example that reflects how options behave with respect to market prices.

Difference Between ITM, ATM and OTM Options

Feature	ITM (In the Money)	ATM (At the Money)	OTM (Out of the Money)
Intrinsic Value	Positive value	Zero	Zero
Call Option Condition	Strike < Spot	Strike = Spot	Strike > Spot
Put Option Condition	Strike > Spot	Strike = Spot	Strike < Spot
Premium Cost	Highest	Moderate	Lowest
Risk Level	Low (already valuable)	Moderate	High (value may never materialise)
Profit Potential	High	Uncertain	Only if price moves strongly in your favour

This ITM OTM ATM chart is handy to keep around while analysing option strategies.

Conclusion

Knowing ITM, ATM, OTM in options can help you choose the correct strike prices and quantify your risk and reward before entering a trade. Whether you are trading a call option or a put option, understanding these basics can make a significant difference to how profitable you are in the options market.

Frequently Asked Questions

1. What are ATM, OTM, ITM in options?

These are classifications used in options trading to describe whether an option has intrinsic value or not. ITM means it has value, ATM means it’s at breakeven, and OTM means it holds no intrinsic value.

2. How do I know if my call option is ITM or OTM?

A call option is in-the-money (ITM) if the strike price is lower than the market price of the underlying asset. If the strike is greater than the market price, it’s OTM.

3. Which option is cheaper: ITM, ATM, or OTM?

OTM options are usually the cheapest because they have no intrinsic value. ITM options are costlier but offer more reliability.

4. Why is understanding ITM, ATM, OTM important in options trading?

It aids traders in evaluating the probability of earning a profit prior to the date of expiration. These terms also influence the options premium, making them essential for any strategy.