When the strike price and the price of the underlying asset are equal, exercising produces no difference from trading at the strike price. This borderline between in the money and out of the money is called ATM.

Consider a hypothetical example in which the price of the underlying asset is 100 yen. Both a call and a put with a strike price of 100 yen are ATM.

This definition looks only at the difference from exercising and does not include the premium. The premium is paid separately, so even if an ATM option is exercised, the overall result is a loss equal to the premium1.

Notes

  1. Central Council for Financial Services Information, "3-4 オプション取引の損益" (3-4 Profit and loss of option trading) (in Japanese), the formula for the buyer's profit or loss (the difference between the market price of the underlying asset and the strike price, less the premium). With a difference of zero, the result is a loss equal to the premium. ↩