What It Means
At-the-money (ATM) describes an option whose strike price is equal to, or nearest to, the current market price of the underlying stock or index. An ATM option has zero intrinsic value — its entire premium is time value.
How It Works
Every option chain has one ATM strike (or two, if the underlying sits exactly between two strikes) at any given moment, and it shifts as the underlying moves. ATM options carry the highest time value of any strike because they have the greatest uncertainty about whether they'll finish in the money — that's also why ATM options tend to have delta closest to 0.5, meaning their premium moves roughly half a rupee for every ₹1 move in the underlying.