An option where the strike price is exactly equal (or very close) to the current market price of the underlying asset. At this point, the option has no intrinsic value, but it still has time value, meaning it could become profitable if the market moves favorably before expiration. 

For example, if EUR/USD is currently trading at 1.1000 and you hold a Call Option with a strike price of 1.1000, that option is considered “at the money.” It wouldn’t make sense to exercise it right now-since buying at 1.1000 when the market is also at 1.1000 brings no gain-but it still has potential if the market rises above that level before expiry. 

ATM options are important in hedging because they offer a balance between cost and flexibility. They’re used in many strategies like Zero-Cost Collars, Risk Reversals, and Synthetic Strategies, where companies want to protect against large moves without paying too much upfront. ATM options sit between In The Money (already profitable) and Out Of The Money (not profitable yet), and they often serve as the starting point for pricing and evaluating different option structures.