Series VIIIEasyOptions Contracts

An option is said to be 'At-the-Money' (ATM) when:

AThe spot price of the underlying is equal to the strike pricecheck_circle
BThe option has no time value left
CThe spot price of the underlying is above the strike price for a call
DThe premium is equal to the strike price

Correct answer

A. The spot price of the underlying is equal to the strike price

lightbulbDetailed Solution

An option is At-the-Money when the underlying's spot price equals (or is very close to) the strike price. This is true for both calls and puts. When the spot moves favourably relative to the strike the option becomes In-the-Money; unfavourably, Out-of-the-Money.

Reference: NISM Series VIII Equity Derivatives, Chapter 3.

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