An option is at-the-money (ATM) when it leads to a zero result in case of its immediate execution. ATM means the spot price of a particular stock is identical to the option strike price.
For the identification of options, the purpose of which lies in the comparison of the option exercise and the underlying asset prices, we can emphasize 3 main groups:
- in-the-money (ITM)
- out-of-the-money (OTM)
- at-the-money (ATM)
When it comes to calls/puts «at-the-money» can be determined as: Asset price = Strike price. ATM options are necessary for running different options strategies.
Suppose someone is buying the option contract which has the strike price of $90. In case the asset price is around $90, the option is ATM. To benefit from this option, an investor wants his contract to be ITM. Thus, it requires the movement in a certain direction depending on the option type (calls or puts).