We're often asked to explain what determines the price of crude oil (as well as bunker fuel, diesel fuel, gasoil, gasoline and jet fuel) options. The variable which has the most influence on the price of an option is the relationship between the price of the underlying crude oil futures or swap and the strike price of the option. An option is at-the-money when the strike price equals or is very close to the price of the underlying futures or swap.


Depending upon the price of the underlying swap relative to a given strike price, an option is said to be at-the-money, in-the-money, or out-of-the-money.
An option is considered in-the-money when the price of the underlying future or swap is above the strike price of a call option or when the price of the underlying swap is below the strike price of a put option.
Lastly, an option is considered out-of-the-money when the price of the underlying future or swap is below the strike price of a call option or when the price of the underlying futures or swap is below the strike price of a put option.






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