What Is an Automated Teller Machine (ATM)?

An automated teller machine (ATM) is an electronic banking outlet that allows customers to complete basic transactions without the aid of a branch representative or teller. Anyone with a credit card or debit card can access cash at most ATMs, either in the USA or abroad.

ATMs are convenient, allowing consumers to perform quick self-service transactions such as deposits, cash withdrawals, bill payments, and transfers between accounts. Fees are commonly charged for cash withdrawals by the bank where the account is located, by the operator of the ATM, or by both. Some or all of these fees can be avoided by using an ATM operated directly by the bank that holds the account. Using an ATM abroad can cost more than using one in the USA.

ATMs are known in different parts of the world as automated bank machines (ABMs) or cash machines.

Understanding Automated Teller Machines (ATMs)

The first ATM appeared at a branch of Barclays Bank in London in 1967, though there are reports of a cash dispenser in use in Japan in the mid-1960s. The interbank communications networks that allowed a consumer to use one bank’s card at another bank’s ATM followed in the 1970s.

Within a few years, ATMs had spread around the globe, securing a presence in every major country. They now can be found even in tiny island nations such as Kiribati and the Federated States of Micronesia.

Types of ATMs

There are two primary types of ATMs. Basic units only allow customers to withdraw cash and receive updated account balances. The more complex machines accept deposits, facilitate line of credit payments and transfers, and access account information.

To access the advanced features of the complex units, a user often must be an account holder at the bank that operates the machine.

Analysts anticipate ATMs will become even more popular and forecast an increase in the number of ATM withdrawals. ATMs of the future are likely to be full-service terminals instead of or in addition to traditional bank tellers.

ATM Design Elements

Although the design of each ATM is different, they all contain the same basic parts:

• Card reader: This part reads the chip on the front of the card or the magnetic stripe on the back of the card.
• Keypad: The keypad is used by the customer to input information, including personal identification number (PIN), the type of transaction required, and the amount of the transaction.
• Cash dispenser: Bills are dispensed through a slot in the machine, which is connected to a safe at the bottom of the machine.
• Printer: If required, consumers can request receipts that are printed out of the ATM. The receipt records the type of transaction, the amount, and the account balance.
• Screen: The ATM issues prompts that guide the consumer through the process of executing the transaction. Information is also transmitted on the screen, such as account information and balances.

Full-service machines now often have slots for depositing paper checks or cash.

How to Use an ATM

Banks place ATMs inside and outside of their branches. Other ATMs are located in high-traffic areas such as shopping centers, grocery stores, convenience stores, airports, bus and railway stations, gas stations, casinos, restaurants, and other locations. Most ATMs that are found in banks are multifunctional, while others that are off-site tend to be primarily or entirely designed for cash withdrawals.

ATMs require consumers to use a plastic card—either a bank debit card or a credit card—to complete a transaction. Consumers are authenticated by a PIN before any transaction can be made.

Many cards come with a chip, which transmits data from the card to the machine. These work in the same fashion as a bar code that is scanned by a code reader.

ATM Fees

Account holders can use their bank’s ATMs at no charge, but accessing funds through a unit owned by a competing bank usually incurs a fee. According to MoneyRates.com, the average total fees to withdraw cash from an out-of-network ATM was $4.55 as of 2022.

Some banks will reimburse their customers for the fee, especially if there is no corresponding ATM available in the area.

So, if you’re one of those people who draws weekly spending money from an ATM, using the wrong machine could cost you nearly $240 a year.

ATM Ownership

In many cases, banks and credit unions own ATMs. However, individuals and businesses may also buy or lease ATMs on their own or through an ATM franchise. When individuals or small businesses such as restaurants or gas stations own ATMs, the profit model is based on charging fees to the machine’s users.

Banks also own ATMs with this intent. They use the convenience of an ATM to attract clients. ATMs also take some of the customer service burdens from bank tellers, saving banks money in payroll costs.

Using ATMs Abroad

ATMs make it simple for travelers to access their checking or savings accounts from almost anywhere in the world.

Travel experts advise consumers to use foreign ATMs as a source of cash abroad, as they generally receive a more favorable exchange rate than they would at most currency exchange offices.

However, the account holder’s bank may charge a transaction fee or a percentage of the amount exchanged. Most ATMs do not list the exchange rate on the receipt, making it difficult to track spending.

The Bottom Line

ATM stands for automated teller machine. These are electronic banking outlets that allow people to complete transactions without going into a branch of their bank. Some ATMs are simple cash dispensers, while others allow a variety of transactions such as check deposits, balance transfers, and bill payments. The first ATMs appeared in the mid- to late 1960s and have grown in number to more than 2 million worldwide.

What Is At The Money (ATM)?

At the money (ATM) is a situation where an option’s strike price is identical to the current market price of the underlying security. An ATM option has a delta of ±0.50, positive if it is a call, negative for a put.

Both call and put options can be simultaneously ATM. For example, if XYZ stock is trading at $75, then the XYZ 75 call option is ATM and so is the XYZ 75 put option. ATM options have no intrinsic value, but will still have extrinsic or time value prior to expiration, and may be contrasted with either in the money (ITM) or out of the money (OTM) options.

Understanding At The Money (ATM)

At the money (ATM), sometimes referred to as “on the money”, is one of three terms used to describe the relationship between an option’s strike price and the underlying security’s price, also called the option’s moneyness.

Options can be in the money (ITM), out of the money (OTM), or ATM. ITM means the option has intrinsic value and OTM means it doesn’t. Simply put, ATM options are not in a position to profit if exercised, but still have value—there is still time before they expire so they may yet end up ITM.

The intrinsic value for a call option is calculated by subtracting the strike price from the underlying security’s current price. The intrinsic value for a put option, on the other hand, is calculated by subtracting the underlying asset’s current price from its strike price.

A call option is ITM when the option’s strike price is less than the underlying security’s current price. Conversely, a put option is ITM when the option’s strike price is greater than the underlying security’s stock price. Meanwhile, a call option is OTM when its strike price is greater than the current underlying security’s price and a put option is OTM when its strike price is less than the underlying asset’s current price.

Special Considerations

Options that are ATM are often used by traders to construct spreads and combinations. Straddles, for instance, will typically involve buying (or selling) both an ATM call and put.

ATM options are the most sensitive to various risk factors, known as an option’s “Greeks”. ATM options have a ±0.50 delta, but have the greatest amount of gamma, meaning that as the underlying moves its delta will move away from ±0.50 rapidly, and most rapidly as time to expiration nears.

ATM options are the most sensitive to time decay, as represented by an option’s theta. Moreover, their prices are most responsive to changes in volatility, especially for farther maturities, and is expressed by an option’s vega. Finally, ATM options are also most sensitive to changes in interest rates, as measured by the rho.

At The Money (ATM) and Near The Money

The term “near the money” is sometimes used to describe an option that is within 50 cents of being ATM. For example, assume an investor purchases a call option with a strike price of $50.50 and the underlying stock price is trading at $50. In this case, the call option is said to be near the money.

In the above example, the option would be near the money if the underlying stock price was trading between about $49.50 and $50.50. Near the money and ATM options are attractive when traders expect a big movement. Options that are even further OTM may also see a jump when a swing is anticipated.

Options Pricing for At The Money (ATM) Options

An option’s price is made up of intrinsic and extrinsic value. Extrinsic value is sometimes called time value, but time is not the only factor to consider when trading options. Implied volatility also plays a significant role in options pricing. 

Similar to OTM options, ATM options only have extrinsic value because they possess no intrinsic value. For example, assume an investor purchases an ATM call option with a strike price of $25 for a price of 50 cents. The extrinsic value is equivalent to 50 cents and is largely affected by the passage of time and changes in implied volatility.

Assuming volatility and the price stay steady, the closer the option gets to expiry the less extrinsic value it has. If the price of the underlying moves above the strike price to $27, the option now has $2 of intrinsic value, plus whatever extrinsic value remains.