underwater option

underwater option definition - finance
An out-of-the-money option is often called an underwater option. A call option is underwater if its exercise price is higher than the current price of the underlying contract. An underwater put option occurs when its exercise price is lower than the current price of the underlying contract. An underwater option has no intrinsic value but still has time value.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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