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Derivatives

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  • August 1, 2021
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DOTM Elasticity

An abbreviation for deep-in-the-money elasticity; the elasticity of an option where its value doesn’t respond to changes in the underlying price. As such, it delta is one. For example, a call option with a strike price of 100, while its underlying is currently trading at 70, will have its delta equal to or approaching zero. Similarly, this situation may be observed when a put option, for example, has a strike price of 100, while its underlying is currently trading at 130. In both cases, the option’s elasticity is said to be deep out of the money.


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