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Definition

The situation where an investment cannot be sold for more than was paid for it. Thus, for example, if a share costs 1000c including your dealing costs, then it will be out of the money until such time as you can sell it to realise more than 1000c after paying your dealing costs. For investors who are using a stop-loss strategy, they will regard themselves as "out-of-the-money" until such time as their stop-loss level rises above the price that they paid for the share (including dealing costs). If in our example given above the investor sets a 10% stop, then he/she will be out-of-the-money until the stop rises above 1000c - in other words where the price reaches 1112c, because at 1112c the stop would be 10% lower at 1001c.

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