The Dangerous Lure of Cheap out of the Money Options

No money put option, Out-Of-The-Money (OTM) Call Option

Content

    What Strike Prices are Out of the money and what is the effect? Is it a special kind of option or is it a special no money put option of referring to certain kinds of options?

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    This free options trading tutorial shall explain in detail what "Out of The Money Options" are and how they work. Out Of The Money Options OTM Options is one of the three option moneyness states that all option traders has to be familar with before even thinking of actual option trading. Understanding how options are priced makes this topic easier to understand. Trading Out Of The Money Options OTM Options is the most aggressive option trading method with an extremely high profit and risk potential and is recommended only for veteran or experienced option traders.

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    Learn how to trade out of the money options here. A call option is considered Out Of The Money OTM when the call option's strike price is higher than the prevailing market price of the underlying stock. It confers you the right to buy the underlying stock at a HIGHER price than the prevailing stock price and hence it has no intrinsic value.

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    Such a call option will gain in value very quickly should the underlying stock rally above it's strike price. As it has completely no intrinsic value and requires the underlying stock to gain in price significantly in order to realise a profit, it is also the cheapest to buy in terms of absolute dollars.

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    Call Option Status.