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ATM vs. OTM

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

In general, at the money options have high exposure to the greeks, meaning that the volatility of at the money options will be around twice as great as out of the money options around the 16 delta.

This increase in greek exposure as you get close to the money is reflected in the realized volatility of the options, meaning that theoretical volatility and actual volatility that you see in your portfolio is efficiently priced.

A 16 delta strangle will have around half the exposure to the greeks (theoretical volatility) as an ATM straddle, as well as only half of the realized volatility as an ATM straddle.

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