An option is considered Out-of-the-Money (OTM) when exercising it would not be profitable based on the current market price.
A call option is OTM when the underlying asset’s market price is below the strike price — for example, stock at $40 and strike at $50.
A put option is OTM when the underlying asset’s market price is above the strike price — for example, stock at $60 and strike at $50.
OTM options have no intrinsic value and consist only of extrinsic (time) value. As expiration approaches, if they remain OTM, they will likely expire worthless.