If you're new to options, one of the first things that trips people up is figuring out which options are at the money, in the money, or out of the money. I get it — the option chain can look overwhelming. So let me give you a few shortcuts that will make this click instantly.
Let's use Google as our example. It closed at $314.90 on Friday. So which option strike is at the money? The $315 strike — it's the one closest to the current market price. Simple.
Now, which options are out of the money? If you're on thinkorswim, they actually highlight them for you — they're blacked out on the chain. Out-of-the-money calls are above the current price, and out-of-the-money puts are below it. Out of the money just means the stock price hasn't reached those strike prices yet.
But here's the real shortcut I want to give you, especially if you're not on thinkorswim...
Use Delta as your cheat sheet.
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Pull up the delta column on your option chain, and everything becomes clear:
At the money options have a delta around 0.50 (or -0.50 for puts). That's your anchor point.
Out of the money options — as you move further away from the current price — will show a delta that keeps decreasing. The further out you go, the lower the delta, because the probability of that option finishing profitable is shrinking. A $400 call on a $315 stock? Tiny delta. Low probability.
In the money options are the opposite. As you move deeper in the money, the delta keeps increasing toward 1.0 (or -1.0 for puts). A $200 call on a $315 stock has a delta of nearly 100 — it's very deep in the money with real intrinsic value.
Here's the quick reference:
Calls: The $200 call has a delta of ~100, the $250 call is around 98, the $300 call is about 73, and at the money ($315) is around 50. As you go further out of the money, the delta drops.
Puts: Same concept, just inverted. At the money is about -55, and the deeper in the money you go (higher strikes on the put side), the bigger the negative delta gets — like -90, -95, approaching -100.
Why does this matter? In-the-money options have intrinsic value — that's real value. Out-of-the-money options are all extrinsic — they're based on time and probability. Understanding this distinction is foundational for every trade you'll ever make.
So next time you're looking at an option chain, put up that delta column and let it guide you. It'll tell you everything you need to know about where an option sits relative to the stock price.