At the money (ATM)
Principles of Finance glossary · Time Value of Money
Definition
An option whose strike price equals the current price of the underlying.
At the money (ATM) in plain English
An option is a contract giving you the right to buy or sell something at a fixed price called the strike. 'At the money' simply means that fixed strike price is currently equal to what the underlying thing is actually trading for right now — no built-in head start either way. Picture a $50 gift-card-style coupon to buy a stock, when that stock happens to be sitting at exactly $50: exercising it today gets you nothing extra, so all its value rests on whether the price moves before the contract expires. Traders care because at-the-money options are the most sensitive to price swings, making them a pure bet on future movement.
Also called: ATM
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