OTM Options

OTM options is the term which is used in derivatives market, full form of OTM is out of money options. Options expire on a fixed date and they cannot last forever and that is the reason why OTM assumes importance. An option the value of which would be zero if it’s expiring today is called OTM.

A call would be OTM when the option strike price is higher than the market price of the underlying and a put would be OTM when the strike price is below the market price of the underlying. One should have knowledge of this term because if you are trading in derivatives you should know that these provides maximum returns but at the same time they are the most risky and therefore one should trade them wisely because any carelessness can result in big loss because at the end of expiry they become zero.



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