ShmoopTube

00:00

Finance what are at the money in the money and

00:05

out of the money underwater options Who A mouthful Well

00:10

it sounds like something contestants shout during wheel of fortune

00:14

big money out of money at the money and yeah

00:17

hopefully they're not landing on bankrupt Want long actually at

00:22

the money means that stock prices match the strike price

00:27

of the stock options that an investor has bought So

00:31

if you have the right to buy a share of

00:33

fifty bucks and then the share actually is at fifty

00:37

bucks when you go to buy well that share is

00:40

at the money at the money for the strike price

00:43

of the option example Time left Joe schmoe has paid

00:49

three bucks for the right to buy a share of

00:51

ko that's coke for eighty dollars The option expires in

00:55

a week and the stock is at seventy six bucks

00:57

a share today If the stock climbs eighty dollars a

01:00

share ieave bidwell then it is said to be at

01:03

the money or at the strike price If it climbs

01:07

above eighty Well then it's in the money like it

01:10

was eighty for it would be four dollars in the

01:13

money And if it was like one hundred dollars would

01:15

be twenty dollars in the money And well a lot

01:18

less volatile because you know you're going to make money

01:20

and sell it if it's below eighty bucks well it's

01:23

out of the money and said to be under water

01:27

out of the money honey it's Not a good thing

01:29

Note that ko could be eighty two fifty and the

01:33

call option buyer has still lost money on the trade

01:36

because from the call option buyer paid three dollars for

01:38

the call and ko ended up being on ly two

01:41

fifty in the money So if the buyer lost half

01:44

a buck on that trade now the buyer can't afford 00:01:47.606 --> [endTime] to buy anything Not even a vow Well

Full Transcript