Guide To ITM and OTM Positions

Guide To ITM and OTM Positions

Most of the terms you’ll read or hear used in relation to digital options trading are common terms used in the primary marketplaces. ITM, in the money, and OTM, out of the money, are two excellent examples. In the binary options realm, these terms relate to both active price positioning, as well as the final position when the trade expires.

In a live digital options trade, an ITM position means that the asset price is currently in a profitable position. For example, if you’ve selected a Call position and the asset price is currently higher than the entry price, then the trade is considered to be in the money at that time. In a closed trade, an ITM position is one which finished in the position you predicted and as such was profitable.

On OTM position is just the opposite. In an open trade, this means that the asset price is currently in a position that will not be profitable. An out of the money finish is one in which your asset price prediction is incorrect and therefore your investment amount was lost. Obviously, you’ll want your digital options trades to be in OTM positions are rarely as possible.

There does exist another term which defines a tie. This would be ATM, or at the money. An ATM position in a live digital options basic trade would be one in which the asset price is exactly the same as the entry price. In a closed trade, it would be an outcome where the ending price was exactly the same as the start, or entry price.

ATM positions are not extremely rare while a digital options trade is live, but it is fairly rare for a trade to end in an ATM position. This is because any price movement that sends the asset price away (either higher or lower) than the entry price is going to be a deciding factor when the trade wraps up. So long as some change has taken place, no matter how small, the trade will be either ITM or OTM.

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