Strike Price
Quick Definition
The predetermined price at which the holder of an option can buy (call) or sell (put) the underlying asset upon exercise.
What Is Strike Price?
The strike price (also called exercise price) is the fixed price at which an option contract can be exercised. For call options, the strike is the price at which the holder can buy the underlying; for put options, it is the price at which the holder can sell. Strike prices are set by the options exchange and listed at standardized intervals that depend on the underlying's price level — typically $1 intervals for stocks under $50, $2.50 for stocks $50-$200, and $5 for higher-priced stocks. The relationship between strike price and current stock price determines the option's moneyness (ITM, ATM, OTM), which directly impacts the option's delta, premium composition, and probability of profit. Strike selection is one of the most important decisions in options trading — it determines the trade's risk/reward profile, capital requirement, and probability of success.
Strike Price Example
- 1AAPL options at $185 have strikes available at $170, $175, $180, $185, $190, $195, $200 — the $185 strike is ATM, $170 is deep ITM (call), $200 is OTM (call)
- 2A trader chooses the $50 strike for a covered call because it offers a 10% upside from the current $45.50 stock price while providing a $2 premium
Related Terms
Exercise Price
The predetermined price at which an option holder can buy (call) or sell (put) the underlying asset, also known as the strike price.
Moneyness
The relationship between an option's strike price and the current price of the underlying asset, classified as in the money, at the money, or out of the money.
In the Money (ITM)
An option that has intrinsic value — a call with strike below the stock price or a put with strike above the stock price.
At the Money (ATM)
An option whose strike price is equal or very close to the current market price of the underlying asset.
Out of the Money (OTM)
An option with no intrinsic value — a call with strike above the stock price or a put with strike below the stock price.
Call Option
A contract giving the holder the right, but not the obligation, to buy an underlying asset at a specified price within a specified time period.
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