At the Money (ATM) is an option where the strike price is equal to the current market price of the underlying asset.

For example, if the stock price of Company XYZ is currently trading at $50 per share, an ATM call option would have a strike price of $50. This means that the option has no intrinsic value, as the stock price is already at the strike price. In this case, the value of the option is made up entirely of its time value or extrinsic value, which is affected by factors such as the time remaining until expiration, the implied volatility of the underlying asset, and the level of interest rates.

ATM options are often used as a neutral strategy for traders who are unsure about the direction of the underlying asset. This is because the option has no intrinsic value and its value is only affected by changes in its time value or extrinsic value. If the stock price moves up or down, the option’s value will change, but it will not experience any gain or loss due to intrinsic value.