Strike Price (redirected from Strike (finance))

Strike price

The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.

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Strike Price

In options, an agreed-upon price for which the underlying is bought (in case of a call) or sold (in case of a put) if the option is exercised. For a call option to be profitable, the strike price must be lower than the market value of the underlying at the time the option is exercised. The opposite is true for a put: the strike price must be higher than the market value. In most cases, the amount of the strike is stated in the option contract; however, in Asian options, the strike is a formula, rather than a set price. For example, the strike may be the average price of the underlying over a set period of time. The strike price is also known as the exercise price or the striking price.

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strike price

The exercise price at which the owner of a call option can purchase the underlying stock or the owner of a put option can sell the underlying stock.

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Strike price. The strike price, also called the exercise price, is the price at which you as an options holder can buy or sell the stock or other financial instrument underlying the options contract if you choose to exercise before expiration.

While the strike price is set by the exchange on which the option trades, and changes only if there's a stock split, merger, or some other corporate action that affects the underlying instrument, the market price of the underlying instrument rises and falls during the life of the contract.

As a result, the underlying instrument might reach a price that would put the strike price in-the-money and make exercising the option at the strike price, or selling the option in the marketplace financially advantageous, or it might not. If not, you let the option expire.

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Strike Price

What Does Strike Price Mean?

The set price at which an option contract can be exercised. Strike prices are associated mostly with stock and index options. For call options, the strike price is the price at which the underlying stock can be bought (up to the expiration date), whereas for put options, the strike price is the price at which the underlying stock can be sold. The difference between the underlying security's current market price and the option's strike price represents the amount of profit per share gained upon the exercise or the sale of the option. This profit results from the options being in the money. In buying an option, the maximum amount that can be lost is the premium paid. Also known as the exercise price.

Investopedia explains Strike Price

Strike prices are a key determinant of the premium, which represents the market value (price) of an options contract. Other determinants include the time until expiration, the volatility of the underlying security, and prevailing interest rates. Strike prices are established when a contract is first written. Most strike prices are in increments of $2.50 and $5.00.

Related Terms:
• Call Option
• Common Stock
• Exercise
• In the Money
• Put Option