What is at-the-money in SAP IS-B-RA - Risk Analysis?

SAP Term: at-the-money

• Component: IS-B-RA

• Component Name: Risk Analysis

• Description: When an option's strike price matches the the price of the underlying security.

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• Key Concepts: 
  At-the-money is a term used in the IS-B-RA Risk Analysis component of SAP. It refers to a situation where the strike price of an option is equal to the current market price of the underlying asset. In this case, the option has no intrinsic value and the investor will only receive the time value of the option. 
  
  How to use it: 
  At-the-money options can be used as a hedge against market volatility. By buying an at-the-money option, investors can protect their portfolio from large losses due to sudden market movements. Additionally, at-the-money options can be used to speculate on future price movements without taking on too much risk. 
  
  Tips & Tricks: 
  When using at-the-money options, it is important to remember that they have a higher time value than in-the-money or out-of-the money options. This means that they will expire faster and may not provide enough protection against large market movements. Additionally, at-the-money options are more expensive than other types of options due to their higher time value. 
  
  Related Information: 
  At-the-money options are just one type of option available in the IS-B-RA Risk Analysis component of SAP. Other types of options include in-the-money and out-of-the money options, which have different characteristics and uses. Additionally, there are other risk management tools available in SAP such as futures contracts and swaps.