Out-of-the-Money (OTM)
A call with a strike above spot, or a put with a strike below spot. Pure time value, no intrinsic value.
An OTM option is worth exactly zero at expiry unless spot crosses the strike first. That makes OTM premium cheap and its percentage returns explosive when a move does arrive. It is also why most OTM buyers lose the full premium most of the time, and why far-OTM weekly calls get sold as "lottery tickets" in trading forums.
Example: with NIFTY at 25,000, a 25,200 call bought for ₹40 is 100% time value. If spot finishes anywhere at or below 25,200 at expiry, even at 25,199, that entire ₹40 is gone, with no partial credit for how close it got.
Call strikes
Put strikes
↑ Quantum Horizon — the ATM strike, spot's current position
Related terms
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