The relationship between strike and spot (forward). It measures the difference between an option‘s strike price and current market price (forward price). Wealth is the amount by which the option is in-the-money or out-of-the-money relative to either spot (hence it is called spot wealth) or the forward (hence is called forward wealth).
Wealth = [(strike/underlying spot or forward)- 1] × 100
For example, if EUR call (USD put) strike is 1.3234, while spot is 1.3000 and forward is 1.2598, then:
Spot wealth = [(1.3234/1.3000)- 1] × 100 = 1.8%
That means the call option is 1.8% out-of-the-money, whereas the put option is in-the-money by the same percentage.
Forward wealth = [(1.3234/1.2598)- 1] × 100 = 5%
Likewise, that implies that the option is 5% out-of-the-money, while the put option is in-the-money by the same percentage.
Wealth was previously known as moneyness.
