ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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OUT-OF-THE-MONEY OPTION Definition
OUT-OF-THE-MONEY OPTION is an option that has no intrinsic value; for example, an option whose strike price, in the case of a put, is lower than the stocks current price, or in the case of a call, is higher. An investor who buys an out-of-the-money option is speculating that the option will rise in value and become in-the-money. See IN-THE-MONEY OPTION.
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PRACTICAL CAPACITY is where the cost of production is based on the practical capacity of production facilities. Therefore, the proportion of overheads allocated to a unit of production is not to be increased as consequence of idle capacity of the plant.