ATM

At the money (ATM) describes an option whose strike price is equal to, or very close to, the current price of the underlying stock. ATM options have no intrinsic value; their entire premium is extrinsic value.

ATM options carry the highest absolute extrinsic value of any strike and have a delta of approximately 0.50 for calls and -0.50 for puts.

Why ATM matters:

• For sellers: ATM options offer the maximum theta harvest, the most time value to collect and watch decay
• For buyers: ATM options (combined as straddles) capture movement in either direction with the tightest breakeven
• For Greeks: ATM options have the highest gamma (delta changes fastest) and highest vega (most sensitive to IV changes)

ATM and the expected move: The price of an ATM straddle (buying both the ATM call and put) approximates the market's expected move for that expiration. If the ATM straddle costs $8, the market implies roughly a ±$8 move by expiry.

Example: MSFT is at $415. The $415 call and $415 put are both ATM. Each has a delta near 0.50. The combined straddle price reflects the market's expected move for that expiration period.

Related terms: ITM, OTM, moneyness, delta, theta, straddle, expected move

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