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.
Glossar
Strike Price
Reference ⎊ The Strike Price is the predetermined reference level set at the contract's inception against which the underlying crypto asset's spot price is compared at expiration or exercise.
Far OTM Options
Option ⎊ Far OTM options, or far out-of-the-money options, are derivative contracts whose strike price is significantly distant from the current market price of the underlying cryptocurrency, making their exercise highly improbable at expiration.