Options trading is full of choices — but among bullish call option buyers, one of the most hotly debated is whether to trade out-of-the-money (OTM) calls or in-the-money (ITM) calls.
In a recent clip from Rick Orford’s Deep In-The-Money Calls video, he explains the real difference between these two strategies, and why traders need to understand what they’re buying before they risk their cash.
OTM Calls: The Lottery Ticket
- Strike price: Above the current market price.
- Value: 100% extrinsic (no real, built-in value).
- Why traders love them: They’re cheap, exciting, and can deliver huge percentage returns if the stock explodes higher.
- The catch: Most expire worthless. Think of them as a lottery ticket — fun, but often just a gamble.
ITM Calls: The Lower-Risk Play
- Strike price: Below the current market price.
- Value: A mix of intrinsic (real) and extrinsic value (time value, which includes market “hype”)
- Why traders use them: More expensive, but more stable. They move more like the stock itself and are less likely to go to zero.
- The catch: They’re more expensive upfront, which means many traders overlook these contracts.
“Deep ITM calls” are considered to be about 20% or more below the stock’s price. These have high delta, meaning they mimic the stock’s movement more closely.
So Which Should You Trade?
- OTM = Big upside, big risk.
- ITM = Steadier gains, more capital required.
Rick sums it up perfectly:
“OTM calls are like buying a lottery ticket. ITM calls are like buying a home — they have real value.”
How to Find Your Best Call Options Strategy
On Barchart, you can:
- Use the Long Call Options Screener to find ITM and OTM setups with filters like delta, implied volatility, and probability of profit.
- Explore the PnL Charts to see breakevens, risk/reward, and Greeks before entering a trade.
- Track expected move charts to decide if the stock’s potential swing supports an OTM gamble or an ITM investment.
Watch the Full Breakdown
This short clip is just the start. Watch the full video explainer to learn the details as Rick walks through live trade examples, explains why ITM calls can be a safer long-term play, and shows how to use LEAPS to capture stock-like gains with less risk.
Bottom Line
Understanding the difference between OTM and ITM calls can help to save you from gambling away your account — and open your eyes to smarter ways of using options.
With the right tools and strategies, you’ll stop trading blind and start trading with purpose. Keep learning more with Barchart’s Options Tutorials and Resources.
On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
