Key Takeaways:
- ITM options = Higher cost, higher success rate
- ATM options = Balanced risk-reward, best for volatility
- OTM options = Cheap bets, but risky
If you’re trading crypto options, one of the most important concepts to understand is what is moneyness in options. It tells you whether an option has value, how likely it is to expire profitably, and how much premium it might carry.
Traders often ask what is moneyness in crypto? Simply put, it shows how the strike price compares to the current spot price. Terms like ITM (in-the-money), ATM (at-the-money), and OTM (out-of-the-money) are everywhere, but few traders truly understand how they influence pricing, risk, and return.
Many beginners overlook that understanding options moneyness is the foundation of every options pricing and trading strategy.
This article breaks it all down using examples from Bitcoin (BTC) and Ethereum (ETH) options. Whether you’re buying calls or selling puts, knowing the moneyness in crypto can be the difference between profit and loss.
What Is Moneyness in Options?
Moneyness describes the relationship between an option’s strike price and the current market price (spot) of the underlying asset.
It helps traders quickly assess:
- Is the option profitable right now?
- How close is the option to becoming profitable?
- What kind of premium or risk does it carry?
In professional trading circles, moneyness in options is often the first filter before analyzing Greeks or volatility.
What are the 3 Categories of Moneyness
- In the money options (ITM): The Option has intrinsic value now
- At the money options (ATM): Option strike equals the spot price
- Out of the money options (OTM): The Option has no intrinsic value yet
In-the-Money (ITM) Options
- Call Options: Strike < Spot Price
- Put Options: Strike > Spot Price
Example:
BTC Spot = $62,000
Call Option Strike = $60,000 → ITM options
Put Option Strike = $64,000 → ITM options in crypto
Characteristics
- Higher premium (includes intrinsic value)
- More expensive to buy
- Less risk of expiring worthless
Best For
- Traders who want higher probability trades
- Hedgers looking for protection with guaranteed coverage
At-the-Money (ATM) Options
Options Strike price is nearly equal to spot price.
Example:
BTC Spot = $62,000
Call or Put Strike = $62,000 → ATM options
Characteristics
- Highest time value (extrinsic value)
- Very sensitive to small price movements
- Maximum Gamma and Vega
Best For
- Traders seeking to profit from volatility
- Short-term speculation
- Strategies like straddles or strangles
👉 Institutional traders also use ATM options in crypto to manage short-term volatility plays.
Out-of-the-Money (OTM) Options
- Call Options: Strike > Spot Price
- Put Options: Strike < Spot Price
Example:
BTC Spot = $62,000
Call Strike = $64,000 → out of the money options
Put Strike = $60,000 → OTM options
Characteristics
- No intrinsic value
- Purely speculative or hedging tools
- Cheaper to buy, risk of total premium loss
Best For
- Low-cost speculative plays
- Traders betting on large moves
- Sellers targeting high Theta decay
👉 For speculators, OTM options in crypto are the cheapest way to take leveraged directional bets.
ITM, ATM and OTM Comparison
| Feature | ITM | ATM | OTM |
|---|---|---|---|
| Intrinsic Value | Yes | Minimal or None | None |
| Premium | Highest | Moderate | Lowest |
| Risk of Expiry Worthless | Low | Moderate | High |
| Use Case | Hedging, High-Prob Trades | Volatility Plays | Speculation, Selling |
How Moneyness Affects Option Pricing
Premium Breakdown
- ITM options in crypto: High intrinsic + some extrinsic value
- ATM options in crypto: Mostly extrinsic value
- OTM options in crypto: All extrinsic value
Volatility Impact
- ATM options have the highest Vega (volatility sensitivity)
Time Decay (Theta)
- OTM options lose value faster near expiry
- ATM options have rapid Theta near expiry
Real-Life Trading Examples with ETH Options
- Buying an ITM ETH Call:
Spot = $3,200, Strike = $3,000, Premium = $280
Safer bet, higher cost - Buying an ATM ETH Call:
Spot = $3,200, Strike = $3,200, Premium = $190
Good for expected breakout - Buying an OTM ETH Call:
Spot = $3,200, Strike = $3,400, Premium = $90
Cheap, high risk/reward
These examples highlight why options moneyness directly shapes your risk-reward ratio and strategy selection.
Conclusion
Understanding what is moneyness in options isn’t just about definitions, it’s a strategic choice. It affects your premium, your risk profile, and your chances of success.
Moneyness in crypto is the lens through which you should evaluate every trade.👉 Trade smarter by knowing where your option stands. Explore live moneyness breakdowns on the Pi42 Options Terminal and make your next move with confidence.
Keep Learning
Option Premium in Crypto: What Are You Really Paying For?
Option Greeks Explained in Crypto: Delta, Gamma, Theta, Vega, Rho