Deep out of the money


Deep out of the money

A call option with an exercise price substantially above the market price. Also put option with an exercise price substantially below the underlying stock's market price. Often substantially below is defined as more than one strike price below (for calls)/above (for puts) the current value of the underlying security.

Deep Out of the Money

1. A put option with a strike price less than half the value of the underlying asset.

2. A call option with a strike price more than double the value of the underlying asset.

In both these situations, the option contract has no intrinsic value. It is unlikely that the option will be in the money by the time the option is exercised.