In options trading, the strike price is the predetermined price at which the underlying asset can be bought or sold. There are three main categories of strike prices: at-the-money (ATM), in-the-money (ITM), and out-of-the-money (OTM).

An ATM strike price is one that is closest to the current market price of the underlying asset. It is the point at which the option holder would neither make nor lose money if they exercised the option.

An ITM strike price is one that is already profitable for the option holder if they were to exercise it. For a call option, an ITM strike price is one that is below the current market price of the underlying asset, while for a put option, an ITM strike price is one that is above the current market price.

An OTM strike price is one that is not yet profitable for the option holder if they were to exercise it. For a call option, an OTM strike price is one that is above the current market price of the underlying asset, while for a put option, an OTM strike price is one that is below the current market price.

Understanding the difference between these types of strike prices is important for traders when selecting the optimal strike price for their options trades.

At-the-money (ATM), in-the-money (ITM), and out-of-the-money (OTM) strike prices define an option's position relative to the underlying asset's current market price.

At-the-money (ATM): The strike price equals the current market price of the asset. The option has no intrinsic value, only time value.

In-the-money (ITM): For a call option, the strike price is below the market price; for a put option, it's above. ITM options have intrinsic value and are more expensive.

Out-of-the-money (OTM): For a call option, the strike price is above the market price; for a put option, it's below. OTM options have no intrinsic value but are cheaper, relying on future price movements.

Traders choose strikes based on strategy, ITM for higher probability, OTM for leverage, and ATM for neutral plays.