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Published On: Tue, Feb 5th, 2013

Deep in the Money

Deep in the Money refers to when the exercise price of a call option is far below the trading value of the underlying equity or index.

A put option would be Deep in the Money if the exercise price of the put option was significantly above the trading price of the put option’s underlying stock or index.  As compared to At the Money, when the exercise price of the call option is equal to the price that the underlying stock or index of the option is trading in the open market (after transaction costs are included.)  The same would be true for the At the Money Put option.  Keep in mind that prices are quoted as At the Money disregarding the actual cost of the option due to transaction costs.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

 

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