Moneyness is defined as the intrinsic worth of an option in its present state. In short, it is an elaborative term for derivative which relates the exercise price of a security to the value of its underlying assets.
Moneyness gives the option holders an idea that whether the exercising of option will give them any profits or not. Moneyness comes in different forms. An option can be in the money, out of money pr at the money. This is a term which denotes the value of the option when it is exercised under right circumstances and in right manner. Thus, loss on an option means that the option was out of money and profit means that the option is in the money. Break even point on the option denotes an option standing At-the-money.
Related posts:
