Proximity to money

The closeness to money , also moneyness (from English moneyness ), is a key figure from the theory of options , which describes the position of the current price ("base price") in relation to the exercise price (the so-called "money") for the underlying asset .

The key figure for a purchase option is defined as follows:

${\displaystyle {\text{Geldnähe}}_{\text{K}}:={\frac {\text{Aktueller Basiskurs}}{\text{Ausübungspreis}}}}$

For a put option , the key figure is defined as the reciprocal of the above fraction:

${\displaystyle {\text{Geldnähe}}_{\text{Vk}}:={\frac {\text{Ausübungspreis}}{\text{Aktueller Basiskurs}}}}$

The terms " in the money ", " at the money " and " out of the money " have established themselves in linguistic usage , which are assigned as follows based on the parameter "proximity to money" (or "moneyness"):

• If the proximity is greater than 1, the option is in the money .
• If the proximity to the money equals 1, the option is at the money .
• If the proximity to the money is less than 1, the option is out of the money .

The indicator of closeness to money is closely related to the intrinsic value of the option: If the option is at the money or out of the money, the intrinsic value is zero; only if the option is in the money does it have an intrinsic value greater than zero.

This parameter is particularly useful because you can read the percentage gain or loss directly. A cash proximity of 1.20 means a profit of 20% for a call option - if exercised immediately - while a cash proximity of 0.90 indicates a loss of 10%.

In addition to options, the term near - money is also used for turbo certificates , which - due to their design - also contain a warrant.

Individual evidence

1. ↑ Being in the money (definition). IG Europe GmbH, 2019, accessed on January 23, 2019 (Trading Glossary).