Out-of-the-Money (OTM)

Out-of-the-Money (OTM) describes an option contract that has no intrinsic value right now—meaning it would be worthless if exercised today. You'll run into this term when trading options (contracts that give you the right to buy or sell a stock at a set price). It matters because OTM options are cheaper but riskier: they only become profitable if the stock price moves in your favor before the contract expires. For example, if you buy a call option (the right to buy) on TechCorp at $100 per share, but TechCorp is currently trading at $95, your option is OTM—you'd be paying to buy at a higher price than the market offers.