“At the money” (ATM) is a term used in financial markets, particularly in the context of options trading. It describes a situation where the current price of an underlying asset is equal to the strike price of the options contract. The term is commonly associated with options, but it can also be used more broadly to describe the relationship between the current market price and a reference level.

Here are the key points related to “at the money” in the context of options:

1. **Options Trading:**
– In options trading, an options contract consists of a strike price and an expiration date. The strike price is the price at which the option holder can buy (for a call option) or sell (for a put option) the underlying asset. When the market price of the underlying asset is equal to the strike price, the option is considered “at the money.”

2. **Call Option (ATM):**
– For a call option to be at the money, the market price of the underlying asset must be equal to the strike price of the call option. In this scenario, exercising the call option would result in neither a gain nor a loss.

3. **Put Option (ATM):**
– For a put option to be at the money, the market price of the underlying asset must be equal to the strike price of the put option. Exercising the put option at this point would also result in neither a gain nor a loss.

4. **Options Premium:**
– The premium of an at-the-money option is often lower compared to options that are in-the-money (ITM) or out-of-the-money (OTM). This is because there is no intrinsic value associated with an at-the-money option; its value is primarily composed of time value.

5. **Implied Volatility:**
– The volatility of the underlying asset, known as implied volatility, can impact the pricing of options. Changes in implied volatility may affect the premium of at-the-money options.

6. **Hedging:**
– Traders and investors may use at-the-money options as part of hedging strategies to manage risk or to take a neutral position regarding the direction of the underlying asset’s price movement.

7. **Neutral Market Outlook:**
– When an investor believes that the price of the underlying asset is likely to remain around the current level, they might consider using at-the-money options for a neutral strategy, such as a straddle or a strangle.

8. **Expiration and Intrinsic Value:**
– As options approach their expiration date, the intrinsic value of at-the-money options becomes more significant. At expiration, if an option is still at the money, it will have no intrinsic value.

It’s important to note that the term “at the money” can also be used more broadly in financial discussions to describe the current market price of an asset in relation to a reference point or a specific strike price. In the options context, it specifically refers to the relationship between the market price and the strike price of the options contract.