An option is out of the money when its strike is unfavorable relative to the relevant underlying price and its intrinsic value is zero. An ordinary call is OTM when the underlying is below the strike; an ordinary put is OTM when it is above the strike. Exact equality is at the money.
Zero intrinsic value, possible market value
Before expiry, an OTM option may still trade for a positive premium because future price movements could make its contractual right valuable. Time remaining and implied volatility help shape that possibility's market valuation.
For example, a call with a 120 USD strike is OTM when the underlying trades at 110 USD. Its premium might rise while the underlying remains below 120 USD, allowing a buyer to sell the option for more than the purchase premium if execution and costs permit. Becoming ITM is not required for every profitable option resale.
What expiry changes
An ordinary option that finishes OTM under the applicable final reference has no positive intrinsic payoff. A buyer holding it to a worthless expiry loses the premium paid, plus relevant costs.
A low quoted premium does not establish a bargain or a small percentage risk: the entire premium can be lost. The classification also does not specify exercise procedures or the seller's earlier trading result. It describes moneyness, while fees, entry price and contract terms determine the complete outcome.