Underwater Option

Underwater Option

An out-of-the-money stock option. That is, it describes an option in which the underlying asset is a stock that is currently trading for less than the strike price of the option. For example, an executive at a publicly-traded company may have stock options in which he/she may buy the stock of his/her own company for $80 per share. If the stock is currently trading at $60 per share, the options are worthless.