underwater

Definition

A call option whose strike price is higher than the market price of the underlying security, or a put option whose strike price is lower than the market price of the underlying security. Thus, there is no incentive to exercise the option today. However, the option still has "time value", value based on the fact that the prices of the underlier can change. This "time value" diminishes as the option approaches maturity.

Use underwater in a sentence

You need to make sure that you are prepared to make any move that will keep you from going underwater.

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The underwater ecosystem is delicate and incredibly valuable as there is so much we have to discover about it yet.

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Sometimes it is impossible to sell a home if it is "underwater", that is, if more is owed on the property than it is worth in the current real estate market.

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undervalued stock underweighted