# ITM, OTM, ATM

Before we continue, it is important to understand the difference between At-the-Money, In-the-Money, and Out-the-Money options.

**ITM**- An option that is in the money offers a profit potential between the strike price and the underlying asset's current market price. An ITM option only has intrinsic value.

**Example**

1. A call option with a strike price less than the value of the underlying asset.
2. A put option with a strike price more than the value of the underlying asset.

**OTM**- an OTM option has no intrinsic value. Out-of-the-money options are sold if possible; otherwise, they expire worthless, and the option seller (writer) loses the premium.

**Example**

1. A call option with a strike price more than the value of the underlying asset.
2. A put option with a strike price less than the value of the underlying asset.

**ATM**- an ATM option has no intrinsic value. If the strike price of an option is the same as the current spot price of the underlying asset, the option is at the money (ATM).

**Example**

1. A call option with a strike price equal to or near the value of the underlying asset.
2. A put option with a strike price equal to or near the value of the underlying asset.

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