At The Money: Essential Guide for Aussie Investors in 2025

When it comes to options trading, few terms are as crucial — or as misunderstood — as at the money (ATM). If you’re an Australian investor eyeing the ASX in 2025, knowing how to identify and use ATM options could make all the difference between a savvy trade and a missed opportunity.

What Does ‘At The Money’ Really Mean?

In simple terms, an option is at the money when its strike price matches the current price of the underlying asset. For example, if BHP shares are trading at $45.00, an options contract with a $45.00 strike price is considered at the money. This is true whether you’re trading calls or puts:

• Call Option (ATM): Strike price equals current share price

• Put Option (ATM): Strike price equals current share price

At the money options are unique because they’re at the tipping point: they have no intrinsic value, but they’re loaded with time value and potential. This is why traders and investors often focus on ATM options when volatility spikes or earnings seasons roll around.

Why At The Money Options Matter in 2025

The landscape for Aussie options traders has shifted in 2025. The ASX has seen a surge in retail options trading, partly driven by tighter interest rates and the growing popularity of derivatives for portfolio hedging. Here’s why ATM options are in the spotlight this year:

• Liquidity: ATM options tend to have the highest trading volumes, making it easier to enter or exit positions without wide bid-ask spreads.

• Sensitivity to Price Moves (Gamma): These options react sharply to changes in the price of the underlying asset, offering nimble traders quick opportunities.

• Premium Pricing: ATM options carry the most time value, so they’re often used in income-generating strategies like covered calls or straddles.

In 2025, with the ASX introducing new weekly options on top blue-chip stocks and ETF products, ATM contracts are especially popular among short-term traders and those looking to capitalise on market swings.

Real-World Examples: How ATM Options Play Out

Let’s bring the concept to life with a real-world scenario from the ASX:

• Example 1: Earnings Play on CSL Limited Suppose CSL shares are at $300 ahead of earnings. An investor buys a CSL call option with a $300 strike price. If CSL jumps post-results, the ATM option can quickly become in the money, delivering potentially outsized gains compared to a direct share purchase — but with less capital at risk.

• Example 2: Hedging a Portfolio with S&P/ASX 200 ETF Puts With XJO trading at 7,400, a portfolio manager buys ATM put options on the S&P/ASX 200 ETF. This protects against sudden market downturns. In a choppy 2025 market, this strategy has become increasingly common among SMSF trustees.

2025 Policy Updates and Strategic Trends

This year, the Australian Securities & Investments Commission (ASIC) has tightened regulations on retail options marketing to ensure investors understand the risks, particularly with leveraged and short-dated ATM contracts. The ASX has also enhanced its options education resources, reflecting a market-wide push for transparency and risk awareness.

Key trends to watch in 2025:

• Weekly Options: With new weekly expiries on popular stocks, ATM options are even more central to event-driven trading.

• Increased Retail Participation: More Australians are using ATM options for both speculation and hedging, thanks to better brokerage platforms and educational content.

• Focus on Risk Management: Regulators and brokers are emphasising the importance of understanding Greeks (especially delta and gamma), which are most pronounced at the money.

Using At The Money Options in Your 2025 Strategy

ATM options aren’t just for professional traders. Everyday investors can use them to:

• Capture short-term volatility: ATM straddles and strangles let you profit from big moves — in either direction.

• Generate income: Selling ATM covered calls on blue-chip shares can boost returns in a flat market.

• Protect portfolios: Buying ATM puts is a straightforward hedge against sudden market corrections.

As always, ATM options require a clear understanding of risk, particularly as their value can evaporate quickly as expiry approaches.