Out-of-the-money: Difference between revisions

Latest revision as of 06:46, 27 September 2019

The Jolly Contrarian’s Glossary
The snippy guide to financial services lingo.™

Index — Click the ᐅ to expand: Glossary

Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Moneyness of a crappy kind: when you're in the hole.^[1] When time value and intrinsic value are the same.

↑ Or, of an option, when it is worthless: when exercising it would cost you money.

@@ Line 1: / Line 1: @@
-“[[Moneyness]]” is a measure of how well a bargain you struck is working out, right now. If it was a good investment, you’re [[in the money]]. If it wasn’t, you’re [[out of the money]].
+{{g}}[[Moneyness]] of a crappy kind: when you're in the hole.<ref>Or, of an [[option]], when it is worthless: when exercising it would cost you money.</ref> When [[time value]] and [[intrinsic value]] are the same.
-The cleanest examples hail from the world of betting (also known, for those in the three-piece suits, as [[derivatives]]).
-If you bet your buddy £100 that England would beat Germany in a football match, there are three minutes left of injury time England are trailing 6-0, you are badly [[out-of-the-money]]. You haven’t ''exactly'' lost the bet — not ''yet'' — but if you wanted to call off the bet, your chum would be asking “well, what’s it worth to you, old fellow?”
-By contrast, your compadre is [[in-the-money]] by a similar amount. All the more galling because, when you started, you were both [[at-the-money]]. But, really, what were you thinking?
 {{moneyness}}
+{{ref}}