Glossary term
OTM (Out-of-The-Money)
An option with no intrinsic value: a call with the stock below the strike, or a put with the stock above the strike.
OTM (Out-of-The-Money) describes an option with no intrinsic value — a call when the stock is below the strike, or a put when the stock is above it. An OTM option's entire price is time value, which decays to zero by expiration if it never moves in-the-money. Premium sellers favor OTM strikes because the probability of finishing worthless (and keeping the premium) is high. See Options 101.