Option Moneyness: In the Money, At the Money, Out of the Money

Moneyness describes where an option's strike sits relative to the current share price. A call is in the money when the share price is above the strike, and a put when the share price is below it; an option with its strike near the share price is at the money; the rest are out of the money. Vyreon groups options into four moneyness buckets: in the money, at the money (within ±2%), 2–10% out of the money, and more than 10% out of the money.

In The Money, At The Money, Out Of The Money

With S the share price and K the strike:

	Call	Put
In the money (ITM)	S > K	S < K
At the money (ATM)	S ≈ K	S ≈ K
Out of the money (OTM)	S < K	S > K

An in-the-money option has intrinsic value: max(S − K, 0) for a call, max(K − S, 0) for a put. At-the-money and out-of-the-money options have none; their whole price is extrinsic (time) value. See intrinsic vs extrinsic value.

Illustrative example: with a stock at $100, a $90 call is $10 in the money and a $90 put is $10 out of the money. A $110 call is $10 out of the money and a $110 put $10 in the money. Both $100 options are at the money.

Strikes are listed at fixed steps, so "at the money" is used for the strike nearest the price, or strikes within a small band around it.

Measuring Moneyness

Several measures are in common use:

Percentage distance: K ÷ S − 1. A $105 strike on a $100 stock is 5% above the price.
Log moneyness: ln(K ÷ S). It is symmetric in a way percentages are not: a strike at double the price and one at half the price are equally far away (±0.69).
Delta: an option's delta is also used as a moneyness scale. At-the-money options have deltas near 0.5 (calls) or −0.5 (puts); a "25-delta put" is a particular out-of-the-money put. See option Greeks.

How Vyreon Uses Moneyness Buckets

Vyreon measures each contract's signed out-of-the-money distance from the session's closing share price:

Calls: K ÷ S − 1
Puts: 1 − K ÷ S

Positive means out of the money, negative in the money. The buckets are:

At the money: distance between −2% and +2%
In the money: more than 2% in the money
2–10% out of the money
More than 10% out of the money

Illustrative example: with the close at $100, a $101 call and a $99 put are both at the money; a $95 call is in the money; a $95 put is 5% out of the money; an $85 put is 15% out of the money.

These buckets describe where flagged volume concentrates in Vyreon's unusual options activity measure. Elsewhere, Vyreon summarizes open interest by open-interest-weighted centres measured in log moneyness, uses at-the-money and 5% and 10% out-of-the-money targets for covered call and cash-secured put yield, and builds at-the-money implied volatility from the out-of-the-money side of each expiry.

Why Moneyness Matters For Option Prices

Time value peaks at the money. At-the-money options carry the most extrinsic value and the largest gamma near expiration.
Implied volatility varies with strike. In equity options, out-of-the-money puts have generally carried higher implied volatility than at-the-money options. See IV skew.

What Moneyness Does Not Tell You

Whether an option is cheap or expensive. That depends on implied volatility and time, not on moneyness alone.
Who holds the option, or why.
Where the price will go. Concentrations of activity at certain strikes are not price targets.

Sources

The Options Clearing Corporation (OCC), Characteristics and Risks of Standardized Options, the options disclosure document: in-the-money, at-the-money and out-of-the-money options.
John C. Hull, Options, Futures, and Other Derivatives (Pearson, many editions): moneyness, intrinsic value and the volatility smile.
Mark Rubinstein, "Implied Binomial Trees", Journal of Finance (1994): implied volatility varying with strike in S&P 500 index options after the 1987 crash.