How Does a Far Out-of-The-Money (OTM) Strike Price Affect the Option’s Premium?

A far Out-of-The-Money (OTM) strike price means the current asset price is a long distance from the strike price, making it less likely that the option will become profitable before expiration. Consequently, a far OTM option has no intrinsic value and a very low extrinsic (time) value.

The premium is thus very small, as the probability of the option expiring worthless is high. These options are often used for speculative, high-leverage bets.