Explore commonly used personal finance terms.
An at-the-money (ATM) option is an options contract where the strike price is equal to the current market price of the underlying asset. ATM options have the highest time value but little to no intrinsic value, as there is no advantage to exercising the option at that moment. Traders may use ATM options for speculative purposes or to hedge positions, as their value is highly sensitive to market movements. ATM options are crucial for options pricing and trading strategies, especially for those targeting short-term market changes.