The state in which options or option positions, whose market prices are very near to their strike prices, are the closest to expiration date or have the shortest time to expiration. In other words, the amount of time left for the option to be exercised narrowly in the money is very short.
In a near the money situation, there are two factors that need to be there:
1- Time to expiration is short or very short.
2- The market price of the underlying oscillates near the exercise price.
For examples, options on OEX stocks are considered “near the money” when 8 days are left till those options do expire.
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