Definition: The term out of the money describes the relation of the strike price of an option and where the underlying futures market is currently trading.
A call option is out of the money if its strike price is greater than the current market price of the underlying commodity contract. A put option is out of the money if its strike price is less than the current market price of the underlying commodity contract.
Examples:
If December crude oil futures are trading at 75.50, then any December crude oil call option with a strike price greater than 75.50 is considered to be out of the money. A put option with a strike price less than 75.50 is considered to be out of the money.
