Options mechanics
What does Out-of-the-Money (OTM) mean and why do these contracts expire completely worthless?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Out-of-the-money (OTM) means a call's strike is above the current stock price or a put's strike is below it, so the option has zero intrinsic value, only time value.
How it works
OTM options are cheaper than ITM or ATM contracts because they require a larger favorable move to become profitable, and OCC data shows most OTM options expire worthless.
An example
If XYZ trades at 50, a 55 call and a 45 put are both OTM since neither could be exercised profitably for intrinsic value today.
Risk & limitations
Buying far OTM options is often described as lottery-ticket trading because time decay and the need for a large move make losing the entire premium the most common outcome.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.