Out-Of-The-Money Option

A call option is said to be out of the money when the strike price is above the current price of the underlying asset. While for a put option, the same can be said when the strike price is below the market price of the asset.

 

Example: Suppose, an underlying stock of a call option is valued at $255 per share. A call option will be considered out of the money if the strike price rises above $255. However, for a put option, a strike price of less than $255 will be said as out of the money.