Moneyness
The relationship between an option's strike price and the current price of the underlying.
Formula
Moneyness = Spot / Strike for a call, or Strike / Spot for a put; values above 1 indicate in the money
Unit
ratio (x, times)
In depth
Moneyness is the single variable that determines most of an option's behaviour: its delta, its ratio of intrinsic to time value, its rate of decay, and its probability of expiring with value. Expressing it as a ratio rather than a rupee difference makes it comparable across underlyings at different price levels. Traders often use delta as a rough proxy for the probability of finishing in the money, which is approximately but not exactly true. Moneyness changes continuously as the underlying moves, which is why a position's character changes even when the trader has done nothing.
Worked example
A 24,000 call with the index at 24,200 has moneyness of 24,200 / 24,000 = 1.008. The 24,600 call has moneyness of 0.984 — out of the money, and priced at a fraction of the first.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Moneyness” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.