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What is the difference between an at-the-money, in-the-money, and out-of-the-money strike price?
In options trading, the strike price is the predetermined price at which the underlying asset can be bought or sold. There are three main categories of strike prices: at-the-money (ATM), in-the-money (ITM), and out-of-the-money (OTM).

An ATM strike price is one that is closest to the current market price of the underlying asset. It is the point at which the option holder would neither make nor lose money if they exercised the option.

An ITM strike price is one that is already profitable for the option holder if they were to exercise it. For a call option, an ITM strike price is one that is below the current market price of the underlying asset, while for a put option, an ITM strike price is one that is above the current market price.

An OTM strike price is one that is not yet profitable for the option holder if they were to exercise it. For a call option, an OTM strike price is one that is above the current market price of the underlying asset, while for a put option, an OTM strike price is one that is below the current market price.

Understanding the difference between these types of strike prices is important for traders when selecting the optimal strike price for their options trades.

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