What is the reason that at the money options have the highest option tradng volume? Is it just a coincidence?

  • At the money options are most sensitive to changes in the underlying. If you believe a stock will go up a little bit, buying an at the money call will give you the biggest profit. Of course, buying out-of-the-money options can be even more profitable, but it requires a bigger change in the underlying. – barrycarter Nov 3 '14 at 17:48

If you're looking to leverage your capital more efficiently, at the money options offer the best balance. Options deep in the money will have little time premium remaining on them, but don't allow for greater leverage. On the other hand deep out of the money options may be thinly traded, or might not offer the "mirroring" you'd like of the underlying. By purchasing ATM you will likely be buying some time premium, but still be leveraging your capital, potentially several times over.

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