what is otm in options

An "out of the money" (OTM) option is an options contract that has no intrinsic value, but only possesses extrinsic or time value. An option is considered OTM if the current market price of the underlying asset is below the strike price for a call option, or above the strike price for a put option. In other words, if the underlying price is below the strike price for a call option, or above the strike price for a put option, then that option is OTM. OTM options are less expensive than in the money options, and the further out of the money an option is, the cheaper it is because it becomes less likely that the underlying will reach the distant strike price. OTM options have no intrinsic value, which is why they are cheaper than in the money options. However, they do have extrinsic or time value, which means that they can still have value if the underlying asset moves in the anticipated direction. OTM options are typically not worth exercising because the current market is offering a trade level more appealing than the options strike price.