An option that has no intrinsic value because exercising it would not be profitable at the current market price.
An option is out of the money (OTM) when it has no intrinsic value. A call option is OTM when the strike price is above the underlying’s market price; a put option is OTM when the strike price is below the market price. OTM options consist entirely of time value and are cheaper than ITM or ATM options, making them popular for directional bets with limited capital, though they carry a higher risk of expiring worthless.
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