Moneyness refers to the number of strikes an option is in or out of the money. Options with a moneyness of zero are At The Money (ATM). Strike prices increase as the moneyness becomes more positive. Strike prices decrease as the moneyness becomes more negative. For calls and call spreads, a positive number is Out of The Money (OTM), negative numbers are In The Money (ITM). For puts and put spreads, a positive number is In The Money (ITM) and negative numbers are Out of The Money (OTM).
| Strike | Moneyness |
|---|---|
| 7 | 7 |
| 7.5 | 6 |
| 8 | 5 |
| 9 | 4 |
| 10 | 3 |
| 11 | 2 |
| 12 | 1 |
| Price 12.10 | |
| 12.5 | 1 |
| 13 | 2 |
| 14 | 3 |
| 15 | 4 |
| 16 | 5 |
| 17 | 6 |
| 17.5 | 7 |
| 18 | 8 |
Consider a stock trading at $12.10
- Moneyness is not expressed in dollars. It is the number of strikes in or out of the money.
-
Strikes with equal moneyness are not necessarily the same distance in dollars away
from the underlying price. In the example to the right, the two strikes that
have a moneyness of 2 are 1.10 and .90 away from the underlying stock
price.
-
Stocks can trade with different strike intervals. If a stock has
options on $1 intervals, options that are $5 in or out of the money
have a moneyness of 5 or -5. If a stock has options on $5 intervals,
options that are $5 in or out of the money have a moneyness of 1 or
-1.
- Not all strikes occur on all expiration dates. In the example to
the right the 12.50 strike only occured on the LEAP.
-
Moneyness can change each day. If a stock with options at $45, $50, and
$55 strikes is trading at $49, the $55 call has a moneyness of
2. If the stock rises to 50.25, the $55 strike will have a moneyness
of 1.
- Moneyness is used to filter options when screening multiple stocks.
