At the Money – What is At the Money?

What is At the Money?

Definition of At the Money:
This is a term used as a currency alternative having a strike cost at or close to the existing market cost for the original currency. This abbreviation “ATM” is also used for describing At the Money. Investors should understand the factors determining the cost of the currency prior to venturing into the trading world. The major drivers of an alternative are intrinsic cost, existing stock cost, volatility and expiry date. The progress of the cost of the currency above or lower than that has a direct effect on the cost of the alternative. As the cost of the currency increases, the more is the chance of the price to rise. If the currency cost decreases, the cost of the puts will rise. The similar relationships hold mainly depending on the space that a strike cost creates at the “At the Money.” The pricing is not perfect in the option markets. Mistakes in the pricing takes place when Forex traders start searching the anomalies. The indirect volatility is utilized for comparing several choices. High volatility equates to high option costs. If there is an important dissimilarity between the indirect instability between the two same choices, it is wise to vend the overpriced choice and purchase the option having high cost, which in turn gives a trading edge.