What Is the Significance of an Option Being “At-the-Money”?

An option is "at-the-money" (ATM) when the strike price is equal to or very close to the current market price of the underlying asset. ATM options have zero or near-zero intrinsic value.

They have the highest time value relative to ITM or OTM options with similar characteristics because they are the most sensitive to small price movements that could push them ITM.