What Does It Mean for an Option to Be “Out-of-the-Money” (OTM)?

An option is "out-of-the-money" (OTM) when it has no intrinsic value, meaning exercising it immediately would not be profitable. For a call option, OTM means the strike price is above the current market price.

For a put option, OTM means the strike price is below the current market price. OTM options only consist of time value.