# When Is a Put Option Considered 'Out-of-the-Money' (OTM)? ▴ Learn

**Published:** 2025-11-20
**Categories:** Learn

---

## When Is a Put Option Considered ‘Out-of-the-Money’ (OTM)?

A put option is considered 'out-of-the-money' (OTM) when the underlying asset's current market price is higher than the option's strike price. If the option were exercised immediately, the holder would lose money.

An OTM option has no intrinsic value, and its entire premium consists only of extrinsic (time and volatility) value.

What Is the opposite of an ITM Call Option?

What Is the Relationship between ‘Moneyness’ and Intrinsic Value?

Does an Out-of-the-Money Option Have Intrinsic Value?

How Does Skew Affect the Pricing of Deep In-the-Money versus Deep Out-of-the-Money Options?

## Discover More

- 
### [Why Is Shorting a Put Option Generally Considered Less Risky than Shorting a Call Option?](https://crypto.greeks.live/learn/why-is-shorting-a-put-option-generally-considered-less-risky-than-shorting-a-call-option/)
![A high-magnification macro photograph isolates a complex optical component resembling an opaque light blue hemi-sphere seated atop a clear, toroidal lens element mounted on a metallic spindle projecting from a darker, layered disc structure suggestive of a spinning data substrate or quantum register. This structure visually models the intrinsic convexity of implied volatility surfaces inherent in sophisticated decentralized exchange perpetual swaps settlement mechanisms. The clear lens edge shows green refraction, embodying the tight spread of efficient market hypothesis applications within AMM liquidity pools. This configuration abstracts concepts like option Greeks delta hedging precision against unpredictable market microstructure, emphasizing the necessity of robust oracle integration for accurate strike price referencing in high-frequency synthetic asset creation. The assembly suggests a core element in determining complex payoff structures for exotic derivatives.](https://crypto.greeks.live/wp-content/uploads/2025/10/Optical-Assembly-Simulating-Volatility-Surface-Dynamics-in-Decentralized-Finance-Mechanisms.jpg)

Short put risk is capped because the asset price cannot go below zero; short call risk is unlimited as the price can rise indefinitely.

- 
### [How Does a Change in Implied Volatility Affect the Price of Out-of-the-Money (OTM) Options?](https://crypto.greeks.live/learn/how-does-a-change-in-implied-volatility-affect-the-price-of-out-of-the-money-otm-options/)
![A stylized, high-fidelity digital rendering depicts complex electromechanical components juxtaposed against a substantial, pale circular data storage medium perhaps symbolizing a pooled liquidity reserve or tokenized asset block. The metallic structures suggest intricate calibration necessary for decentralized finance operations, specifically echoing concepts like collateralized debt positions or oracle integration within a smart contract framework. The muted blue and cyan paneling hints at layered architecture crucial for secure on-chain governance and robust execution of complex option strategies such as synthetic asset creation or delta hedging maneuvers across cross-chain settlement layers. This visualization captures the underlying engineering fidelity required for reliable yield farming protocols and reliable distributed ledger technology stability.](https://crypto.greeks.live/wp-content/uploads/2025/10/Automated-Market-Maker-Mechanism-Visualization-High-Fidelity-Digital-Asset-Securitization-Protocol.jpg)

OTM options are highly sensitive to IV changes; an IV spike causes a rapid price increase, raising the potential for quote-to-execution slippage.

- 
### [How Does an Attacker Cash out Their Illicit Gains?](https://crypto.greeks.live/learn/how-does-an-attacker-cash-out-their-illicit-gains/)
![The sleek, stylized mechanical assembly, resembling a high-precision bolt action or control interface, traverses against a deep void juxtaposed with a mottled cyan and dark blue exoplanet. This visual metaphor encapsulates the delicate precision required for managing complex DeFi primitives like options vault collateralization or managing governance tokens within a DAO structure. The prominent lever, with its high-gloss cerulean orbs, suggests actuation akin to executing a significant liquidation event or adjusting delta hedging parameters in perpetual swaps trading. Such imagery speaks to the deterministic yet aesthetic nature of smart contract execution, controlling vast digital assets with granular control mechanisms, perhaps referencing the secure finality of block confirmations or managing liquidity pool ratios through transparent, auditable mechanisms embodying blockchain immutability and operational security.](https://crypto.greeks.live/wp-content/uploads/2025/10/Futuristic-Lever-Mechanism-Over-Planetary-Body-Symbolizing-Decentralized-Autonomous-Organization-Governance-Mechanisms.jpg)

Gains are cashed out by moving liquid assets (obtained via double-spend) through mixers and then converting to fiat via P2P or less regulated exchanges.

- 
### [How Does Selling a Put Option Relate to the Risk of a Covered Call (Put-Call Parity)?](https://crypto.greeks.live/learn/how-does-selling-a-put-option-relate-to-the-risk-of-a-covered-call-put-call-parity/)
![The visual composition depicts precisely machined, interlocking metallic components suggesting robust connectivity and structural integrity, mirroring the secure aggregation layer of a decentralized finance protocol. These elements, rendered in muted cyan and pale beige against absolute darkness, evoke smart contract audit rigor and settlement finality. The junction point symbolizes a crucial liquidity provisioning nexus, potentially representing concentrated liquidity mechanisms in Automated Market Makers AMMs or cross-chain bridging security protocols. The overall aesthetic suggests engineering excellence vital for minimizing slippage and achieving deterministic order execution within volatile perpetual swaps markets or complex option vault structures, emphasizing custodianless asset management principles underlying true DeFi sovereignty.](https://crypto.greeks.live/wp-content/uploads/2025/10/Interlocking-Modular-Subsystems-Visualizing-Decentralized-Exchange-Liquidity-Pool-Infrastructure-Architecture.jpg)

Put-Call Parity links the two: a covered call is synthetically similar to a short put, offering a comparable risk-reward profile.

- 
### [How Does the Strike Price Relate to an Option Being “In-the-Money” (ITM)?](https://crypto.greeks.live/learn/how-does-the-strike-price-relate-to-an-option-being-in-the-money-itm/)
![This visual presents an apparatus featuring a deep indigo textured dome juxtaposed against a smooth cream carapace, grounded by a metallic substrate exhibiting micro-etched concentric wave patterns and a protruding gimbaled node. Conceptually, this represents the layered complexity of structured products within DeFi, specifically modeling the implied volatility skew often observed in crypto options markets. The blue velvet suggests high premium risk exposure, while the cream element signifies a stable base asset or collateralization layer. The visible underside detailing alludes to the intricate smart contract logic governing liquidity pool mechanisms and Automated Market Maker AMM slippage parameters. This structure embodies the non-linear payoff profiles inherent in exotic derivatives, demanding precise risk modeling for effective portfolio hedging against instantaneous price discovery fluctuations and governance token decay risk.](https://crypto.greeks.live/wp-content/uploads/2025/10/Asymmetric-Topological-Structure-Exemplifying-Decentralized-Finance-Volatility-Surface-Contours.jpg)

ITM for a call is when market price is above strike; for a put, it is when market price is below strike.

- 
### [What Is the Difference between a ‘Call Option’ and a ‘Put Option’?](https://crypto.greeks.live/learn/what-is-the-difference-between-a-call-option-and-a-put-option-2/)
![This composition features intersecting planes of reflective material, one exhibiting a cool cyan luminescence, crossing a beige, tubular apparatus bisecting the frame, suggestive of an intersection point in complex financial modeling. The sharp geometric lines overlaying the deep black background evoke the precise execution of layered financial instruments. Conceptually, this represents the confluence of different Automated Market Maker functions navigating volatility surfaces, perhaps visualizing the structural integrity of a Synthetic Asset issuance framework. The interplay mirrors the challenge of Delta neutral positioning against sudden shifts in implied volatility skew, essential for managing exotic options payoff profiles across decentralized exchanges utilizing complex smart contract logic for automated collateral management and perpetual swaps settlement.](https://crypto.greeks.live/wp-content/uploads/2025/10/Abstract-Visualization-of-Colliding-Liquidity-Pools-and-Gamma-Hedging-Mechanisms-in-DeFi-Derivatives.jpg)

Call option grants the right to buy; Put option grants the right to sell the underlying asset at the strike price.

- 
### [When Is an Option Considered ‘Out-of-the-Money’?](https://crypto.greeks.live/learn/when-is-an-option-considered-out-of-the-money/)
![A rendered close-up reveals a multi-bladed kinetic structure featuring beige and deep blue vanes converging on a highly polished, ovular central nexus against absolute black. This visual aesthetic symbolizes the complex interplay within decentralized finance infrastructure, specifically modeling the implied volatility skew of exotic options. The sleek, almost biomimetic form suggests streamlined execution mechanisms for high-frequency trading algorithms managing perpetual swaps and synthetic asset creation. Contemplating this structure reflects understanding arbitrage opportunities arising from mispriced Gamma exposure across various liquidity pools, demanding precise risk parity management for portfolio stabilization in nascent DeFi protocols. The cyan edging implies potential embedded decentralized oracle feedback loops governing settlement finality.](https://crypto.greeks.live/wp-content/uploads/2025/10/Aerodynamic-Propeller-Hub-Design-Modeling-Stochastic-Volatility-Surface-Calibration-Futures.jpg)

Zero intrinsic value; for calls, the strike is above the market price; for puts, the strike is below the market price.

- 
### [Define the Conditions for a Put Option to Be Considered Out-The-Money (OTM)](https://crypto.greeks.live/learn/define-the-conditions-for-a-put-option-to-be-considered-out-the-money-otm/)
![Abstract geometric structures intersect against absolute black representing stochastic modeling of immutable ledger entries. A central nexus pivots two opposing arms, resembling strike price axes or perpetual futures contracts execution timelines. Curved spectral lines trace implied volatility skews across the implied distribution function. This visualization captures the complex interplay of synthetic asset mechanics within DeFi options protocols where liquidity provisioning impacts slippage and basis risk management for exotic derivatives. The beige and teal planes suggest underlying asset states or collateral pools subject to liquidation thresholds. Expertise in navigating non-linear payoff structures demands deep understanding of theta decay and gamma exposure inherent in high-frequency settlement environments.](https://crypto.greeks.live/wp-content/uploads/2025/10/Asymmetrical-Volatility-Surface-Representation-in-Decentralized-Option-Primitives-Configuration.jpg)

Underlying Price > Strike Price for a Put option to be Out-The-Money.

- 
### [How Does Delta Change as an OTM Call Option Moves Deeper OTM?](https://crypto.greeks.live/learn/how-does-delta-change-as-an-otm-call-option-moves-deeper-otm/)
![This luminous composition depicts a sleek, off-white toroidal mass interfacing with an emergent cyanic mechanical structure against a void backdrop suggesting deep space or digital isolation. The visual metaphor implies a critical convergence point analogous to an options contract nearing its terminal date within a decentralized finance ecosystem. The tapering metallic cone bridging the two elements represents the precise moment of strike price determination or potentially a quantum-resistant encryption key deployment. Keywords like volatility skew and synthetic position replication are pertinent here, visualizing the delicate balance of underlying asset price action relative to margin requirements. The intricate spoked structure suggests lattice-based cryptography underpinning distributed ledger technology while the glow emphasizes realized intrinsic value transition. This abstract framework models the high-stakes mechanics of gamma scalping executed across cross-chain interoperability protocols.](https://crypto.greeks.live/wp-content/uploads/2025/10/Conceptual-Visualization-of-Near-Term-In-The-Money-Option-Expiry-Against-Blockchain-Infrastructure-Throughput.jpg)

Delta decreases and moves closer to 0, indicating lower price sensitivity and a near-zero chance of ITM expiration.

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