I believe at the money options (ATM) are the best stock option for beginners to trade. And it has nothing to do with the profit potential of the trade.
Have you ever looked at an option chain? There are hundreds of option contracts listed and new traders have no idea which one to trade.
So they usually go with the most common method for new traders. Picking the cheapest ones, the "out of the money options".
At the money options provide a safe and relatively inexpensive choice for new traders.
So what does ATM mean?
At-the-money (for puts and calls) is where the stock price and the strike price are the same. Or an option contract with a strike price closest to the current stock price. For example: Stock Price $40.98 and Strike Price $40.
The reason I said new traders should pick the ATM option is because it's a sweet spot in regards to the risk/reward balance.
Out of the money options are cheap. They have the potential to give you the greatest reward if the stock moves in price, but they are also the riskiest to trade because the stock has to make a significant move.
In the money options cost more, but people like them because they generally move dollar for dollar with the stock price.
And to be honest most of the info you read on in the money, out of the money, and out of the money won't make much sense until you actually start trading and can "see" what I'm referring to.
Until then, just try your best to comprehend the concepts and at least get the basic definition down.
ATM: the strike price and the stock price are the same or nearly equal to each other.
In the following video...
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