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At the money (ATM)

An option whose strike is at (or very near) the current stock price.

An option is at the money when its strike sits right around the current price of the underlying. Traders rarely need the strike to match the price to the cent, so ATM is best understood as a small zone near the spot rather than a single exact number. Both calls and puts can be ATM at the same time, since it's the strike relative to the market that matters, not the type of option.

In practice this is where an option's character is most balanced. Delta hovers near 0.50, so the position gains and loses roughly like half a share for each move, while time decay (theta) and sensitivity to implied volatility (vega) are at their highest here. If a stock trades at 100 and you buy the 100 call, small moves already shift its value noticeably.

A common mistake is treating an ATM option as cheap because it holds no intrinsic value. Its price is pure extrinsic value, which means it bleeds fastest as expiry approaches. Buyers pay the most for time exactly where time erodes quickest, so a flat market can quietly drain an ATM long even when your directional view eventually proves right.

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