MTM Options Trader Newsletter - ATM, ITM and OTM Options Explained

This Week in the Market Last week was relatively quiet despite all the big-name companies announcing earnings and the Federal Reserve remaining consistent with its message and leaving rates alone for now. Looking ahead to this week, not much has changed as the three major indexes are still trading in a fairly tight range. A bullish to non-bearish bias until proven otherwise makes sense. Implied volatility levels have ticked up a tad over the past couple of weeks, although the Fed has tried to reassure traders and investors that it will do everything to curb any potential inflation notions and keep the economy moving forward as we try to break out of this pandemic. The bulk of the quarterly earnings are already in the books, but many retailers remain on the docket to announce. To kick off May, there are several economic reports due this week, including the April jobs report set for Friday before the open as the main event. It is quiet on the Fed speaker front this week with none expected. Have a tremendous and healthy week, and take note and verify the expected earnings announcements before taking any trade!

May 3: Construction Spending May 4: Trade Deficit May 4: Factory Orders May 6: Jobless Claims May 6: Productivity and Labor May 7: Unemployment May 7: Wholesale Inventories May 7: Consumer Credit Read Our Blog

ATM, ITM and OTM Options Explained There are three ways based on strike prices to buy and sell options with varying degrees. An option can be at-the-money (ATM), in-the-money (ITM) or out-of-the-money (OTM). But what makes an option ATM, ITM or OTM? Below we will answer that very question and show a few examples that should make the concept a little easier to fully understand. For the sake of this explanation, we will use JPMorgan Chase (JPM), which at the time of this writing was trading right around $149. ATM Options An at-the-money option is a call or a put option that has a strike price about equal to the underlying price. The ATM options (the 149-strike put or call in JPM's case) have only time value (a factor that decreases as the option's Continue Reading ... MTM Watchlist Here are several trade ideas we will be looking at in group coaching class this week: SPY – Put credit spreads have worked extremely well over the past several months, and there is no reason not to consider another this coming week around the $333 level. NFLX – After gapping lower on earnings, the stock has not been able to move well above the $515 level, and calendars and iron condors have worked well. However, with a bullish open, bull call spreads will be looked at. Otherwise, neutral spreads may be the way to go yet again. HD – After a climactic move higher since March, the stock has taken a breather over the past couple of weeks. But on Thursday, it broke out of its downtrend. With a strong showing on Monday, bull puts and bull calls will be considered.

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The strategies in this newsletter are for educational and informative purposes only. All information disclosed in this newsletter should not be considered complete in its entirety. Market Taker Mentoring, Inc. will not be held responsible for changes, oversights, errors or omissions. Dates, prices, news and other information may not be accurate. Please verify all information before trading. You alone are responsible for your own investment decisions. Options involve risk and are not suitable for all investors. Before trading options, please read Characteristics and Risks of Standardized Option (ODD), which can be obtained from your broker; by calling (888) OPTIONS; or from The Options Clearing Corp., 125 S. Franklin St., Suite 1200, Chicago, IL 60606. No statement in this newsletter is intended to be a recommendation or solicitation to buy or sell any security or to provide investment or trading advice. Traders and investors considering options should consult a professional tax advisor as to how taxes may affect the outcome of contemplated options transactions. Copyright Market Taker Mentoring, Inc. 2008 - 2021. All rights reserved. Reproducing or redistributing this content is a violation of federal law.

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