Out-of-the-Money

An option is out-of-the-money when it has no intrinsic value, meaning it would not be profitable to exercise it at the current market price. For a call option, this means the underlying asset price is below the strike price.

For a put option, it means the asset price is above the strike price. Despite having no intrinsic value, out-of-the-money options still command a premium, which is composed entirely of extrinsic or time value.

These options are often cheaper to purchase and offer higher leverage, but they also have a lower probability of being profitable by expiration. They are popular among traders seeking speculative positions with limited downside risk.