Moneyness: in, at and out of the money

The three states

• A call is in the money (ITM) when the price is above its strike; a put is in the money when the price is below its strike.
• An option is at the money (ATM) when its strike is the one closest to the current price. BOSS marks the listed strike nearest to the forward price as ATM.
• A call is out of the money (OTM) when the price is below its strike; a put is out of the money when the price is above its strike.

The same strike is in the money for one side and out of the money for the other: with BTC at $100,000, the $90,000 call is in the money and the $90,000 put is out of the money.

Against which price?

An option settles at expiry, so what matters is the price of the underlying for that expiry, not today's spot price. That price is the forward: the price agreed today for buying the underlying at a future date, here the option's expiry. In crypto the futures market sets it: the future that expires on that date (or, where none does, a forward the venue derives from its own options) tells you what BTC costs for that day.

The forward differs from spot by the basis, the market's carry: roughly what buyers pay to get exposure now and pay for the coin later. In crypto it is usually a small positive premium that grows with time to expiry. With spot at $100,000, a 30-day forward might be $100,400, a basis of 0.4%.

Options are priced against the forward because at expiry the forward and spot meet: the forward is today's market price for the very date the option settles on, and a future for that date is what the option is hedged with. So BOSS measures moneyness and intrinsic value against each expiry's own forward, the same price the venue uses to value its options. With that $100,400 forward, a $100,000 call is already slightly in the money, even with spot exactly at $100,000. More in forward price and basis.

Intrinsic value and time value

Moneyness splits every premium into two parts:

• Intrinsic value is what the option would pay if it settled at today's forward: max(F − K, 0) for a call, max(K − F, 0) for a put. Only in-the-money options have it.
• Time value is everything else: premium − intrinsic value. It is what the market charges for the chance that the price moves further before expiry, and it melts to zero by expiry (see theta).

A worked example

With a 30-day forward of $100,000 and, for simplicity, the same 50% implied volatility at every strike:

Option	Moneyness	Premium	Intrinsic	Time value
$90,000 call	ITM	$11,830	$10,000	$1,830
$90,000 put	OTM	$1,830	$0	$1,830
$100,000 call	ATM	$5,710	$0	$5,710
$110,000 call	OTM	$2,280	$0	$2,280
$110,000 put	ITM	$12,280	$10,000	$2,280

Two things to notice. First, the call and the put at the same strike carry the same time value: $1,830 at $90,000 and $2,280 at $110,000. That is put-call parity at work. (In a real market the volatility differs by strike, the smile, so the live table below won't be this tidy.) Second, time value is largest at the money and shrinks as the strike moves away in either direction: an ATM option is the one whose outcome is most uncertain.

Why it matters for strategies

Moneyness is how strategies are described and built. A long straddle buys at-the-money options to pay for the most uncertainty; a short strangle sells out-of-the-money options to collect time value with a buffer on both sides. Deep in-the-money options behave almost like the underlying itself (their delta is close to 1 or −1); far out-of-the-money options are cheap, mostly time value, and usually expire worthless.