Explain the Concept of “At-the-Money” (ATM) for Both Call and Put Options

An option is considered At-the-Money (ATM) when the underlying asset's current market price is exactly or very close to the option's strike price. In this state, the option has no intrinsic value.

ATM options typically have the highest extrinsic value or time value, as the probability of them moving ITM is considered highest. They are a point of balance between the two other moneyness states.