At the money
An option whose exercise price equals the current price of the underlying. Exercising now would yield nothing, but uncertainty about the outcome is greatest here, and so is time value.
Where you will meet it
At the money appears in 2 learning outcomes on the CFA syllabus. A few of them:
- Explain what an option's moneyness means
“An option is in the money when exercising it immediately would produce a positive payoff, at the money when the underlying sits at the exercise price, and out of the money otherwise.”
- Split an option's price into time value and intrinsic value
“Time value is greatest when the option is at the money, because that is where uncertainty about the final outcome is highest, and it decays toward zero as expiry approaches.”
See also
Practise it
Practise at the money until it is automatic: questions that explain every wrong option.
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