Out of the money

An option is out of the money (often written "out-of-the-money") if it has a negative intrinsic value.

A call option is out of the money if the exercise price is greater than the price of the underlying asset, vice versa for a put option.

It is important to remember than an option that is deeply out of the money still has a positive value. An option always has a positive value because its holder can always choose not to exercise. The option value is always greater than a negative intrinsic value - unless the underlying is worth zero.

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