Moneyness — ITM, ATM and OTM
Why some strikes cost ₹450 and others ₹40, and how to read the shaded cells on the option chain.
One question: "if it expired right now, would it be worth anything?"
That's all moneyness is. Take NIFTY at 22,430:
- The 22,200 call gives you the right to buy at 22,200 something worth 22,430. Worth 230 right now → in the money ().
- The 22,700 call gives you the right to buy at 22,700 something worth 22,430. Worth nothing right now → out of the money ().
- The 22,400 call is the strike closest to the current price → at the money ().
For puts, everything flips: the right to sell at 22,700 when the market is at 22,430 is worth 270 → the 22,700 put is ITM.
| Call is… | Strike | Put is… |
|---|---|---|
| ITM | 22,100 | OTM |
| ITM | 22,200 | OTM |
| ITM | 22,300 | OTM |
| ATM | 22,400 | ATM |
| NIFTY spot 22,430 | ||
| OTM | 22,500 | ITM |
| OTM | 22,600 | ITM |
| OTM | 22,700 | ITM |
This is exactly how the Option Chain page shades its cells: shaded = in the money. Calls are shaded above the spot divider (lower strikes), puts below it (higher strikes).
Intrinsic value: the "right now" worth
The amount an option is in the money is its :
Call: max(0, spot − strike) Put: max(0, strike − spot)
An OTM option has zero intrinsic value. So why does it still cost money? Because there's still time for NIFTY to move there. Everything you pay above intrinsic value is :
Premium = intrinsic value + time value
Here are real-looking prices for NIFTY calls with spot 22,400 and 7 days to expiry:
| Strike | Moneyness | Premium | Intrinsic | Time value |
|---|---|---|---|---|
| 22,000 | Deep ITM | ₹456.45 | 400 | 56.45 |
| 22,200 | ITM | ₹299.00 | 200 | 99.00 |
| 22,400 | ATM | ₹175.10 | 0 | 175.10 |
| 22,600 | OTM | ₹89.90 | 0 | 89.90 |
| 22,800 | Deep OTM | ₹39.80 | 0 | 39.80 |
Look at the last column: time value is largest at the money and shrinks as you go deeper in either direction. ATM options are where the most uncertainty is — will it end above or below? — so that's where the "chance" is priced highest.
Picking a strike: cheap isn't the same as good value
New traders often buy deep OTM options because they're cheap. Compare:
22,800 CE at ₹39.80 (deep OTM)
- Costs only ₹2,587 per lot.
- NIFTY must rise above 22,839.80 just to break even — almost 2% in a week.
- Most of the time it expires worthless.
- When it works, the % return is huge.
22,200 CE at ₹299 (ITM)
- Costs ₹19,435 per lot.
- Breakeven 22,499 — only about 100 points above spot.
- Behaves much more like NIFTY itself.
- Smaller % return, but it works far more often.
Moneyness changes every second
Moneyness isn't a property of the contract — it depends on where the spot is right now. If NIFTY rallies from 22,430 to 22,750, yesterday's OTM 22,700 call is now ITM. That's why the shading on the option chain moves as the market moves.
Quick check
NIFTY is at 22,430. Which option is in the money?
Quick check
An option trades at ₹120 and is out of the money. How much of that ₹120 is time value?