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Strike Price

Strike price refers to the fixed price at which the holder of a derivative option contract such as a call or put option can buy or sell the underlying asset. For call options, the strike price is the price at which the holder can purchase the underlying asset, while for put options it is the price at which the holder can sell. The difference between the current market price of the underlying asset and the option's strike price determines the potential profit or loss for options that are in or out of the money. Strike prices are set when the contract is written and are usually in increments of $2.50 or $5.

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35 views

Strike Price

Strike price refers to the fixed price at which the holder of a derivative option contract such as a call or put option can buy or sell the underlying asset. For call options, the strike price is the price at which the holder can purchase the underlying asset, while for put options it is the price at which the holder can sell. The difference between the current market price of the underlying asset and the option's strike price determines the potential profit or loss for options that are in or out of the money. Strike prices are set when the contract is written and are usually in increments of $2.50 or $5.

Uploaded by

Gaurav
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Strike Price

What Does Strike Price Mean?


The price at which a specific derivative contract can be exercised. Strike prices is mostly used to
describe stock and index options, in which strike prices are fixed in the contract. For call options,
the strike price is where the security can be bought (up to the expiration date), while for put
options the strike price is the price at which shares 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 is true for options that are in the money; the maximum amount that can be lost is the
premium paid.

Also known as the "exercise price".

Investopedia explains Strike Price


Strike prices are one of the key determinants of the premium, which represents the market value
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

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