Out of the Money in stock trading.

 

• Out of the money is also known as OTM, meaning an option has no intrinsic value, only extrinsic value.
• A call option is OTM if the underlying price is trading below the strike price of the call. A put option is OTM if the underlying's price is above the put's strike price.
• An option can also be in the money or at the money.
• OTM options are less expensive than ITM or ATM options. This is because ITM options have intrinsic value, and ATM options are very close to having intrinsic value.

Stocks Undelying value : 25.00 Rs.

Strike Price: 30.00 Rs @ 2.50 CALL

Upon expiration the trader can buy the stock at 30.00 Rs if the underlying value goes above 30.00 Rs + premium paid.

Stocks Undelying value : 25.00 Rs.

Strike Price: 20.00 Rs @ 2.50 CALL

Upon expiration the trader can sell the stock he holds at 20.00 Rs if the underlying value  falls below 20.00 Rs  - premium paid.

Source: Investopedia.com