Out of the Money

An option is described as being out of the money when the price of the underlying instrument is below the strike or exercise price for a call option (an option to buy), and above the strike price for a put option (an option to sell). The more an option is out of the money the cheaper it becomes as the likelihood that it will be exercised becomes smaller. Options can also be described as being deeply out of the money when they are likely to expire out of the money.

See also: In the Money, At the Money