At the Money (ATM)
An option is at-the-money when its strike price is approximately equal to the current price of the underlying.
ATM options have little or no intrinsic value but the most extrinsic value, and their delta is roughly 0.50 — they gain or lose about $0.50 per $1 move in the underlying.
Because they hold the most time value, ATM options decay fastest as expiration approaches.
Example. With the stock at $100, the 100-strike call and put are both at-the-money and carry the highest time premium of any strike.
FAQ
What is the delta of an at-the-money option?
Roughly 0.50 for a call and −0.50 for a put — it moves about half a dollar per $1 move in the underlying.
Why do at-the-money options decay fastest?
They hold the most time value, and time value erodes to zero by expiration, so they have the most to lose to theta.
Related terms
See also: Long Straddle