At The Money (ATM)

1. Definition

ATM refers to an option where the Strike Price is equal (or extremely close) to the current price of the underlying asset.

2. Key Characteristics

1. Max Time Value: ATM options have the highest amount of "Extrinsic Value" because the uncertainty of the outcome is greatest.
2. Highest Liquidity: Most trading volume occurs here. Spreads are tight, making entry and exit easy.

3. Investment Logic (Delta)

• Delta: Around 0.5.
• Sensitivity: It represents a 50/50 probability of expiring ITM.
• Usage: This is the "Goldilocks" zone for many traders—balancing cost, risk, and potential reward. It is the primary strike for volatility trading (like Straddles).