Exercise price
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Exercise price
The price at which the security underlying an options contract may be bought or sold.
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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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exercise price
The dollar price at which the owner of a warrant or an option can force the writer to sell an asset (in the case of a call option or warrant) or to buy an asset (in the case of a put option). The exercise price is set at the time the option is issued and, except for unusual instances that include warrants, remains constant until the option expires. A market price of an asset above, or expected to be above, an option's exercise price gives the option value. See also aggregate exercise price, step-up.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
Exercise price.
An option's exercise price, also called the strike price, is the price at which you can buy or sell the stock or other financial product that underlies that option.
The exercise price is set by the exchange on which the option trades and remains constant for the life of the option.
However, the market value of the underlying investment rises and falls continuously during the period in response to market demand.
Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.