An at-the-money option (put option) in which the strike price is equivalent or approximately equal to the underlying asset’s price. There is little or no intrinsic value in ATM puts. In other words, this option would generate zero cashflow if it were exercised in its current moneyness state. For instance, if XYZ stock is currently (in February) trading at $50, then the March $50 put would be at-the-money.

A put on an index would be at-the-money when the current index value equals the strike price. For example, an index put with strike price of 1,000 would be at-the-money when the index is currently trading at 1,000.

However, in real time calculations, the effect of the premium paid by the option’s holder has to be taken into consideration. For example, an American put option with a strike price of $15 and a premium of $3 will be at the money if its underlying assets is currently trading at $12, since its strike price is equal to the summation of its underlying price and premium:

Strike price = underlying price + premium

15 = 12+ 3

From the perspective of the option’s holder (the long), exercising the at-the-money put will not be feasible as it leads to the sale of the underlying at the strike price which is equal to the option’s cost and the market price of its underlying. If such a sale takes place, it would result in zero dollar gain or loss for every unit of the underlying. And for an option contract involving 100 shares, for example, the gain or loss would be zero.