Options Basics
What is Strike Price?
The predetermined price at which an option can be exercised.
📖 Complete Definition
The strike price (also called exercise price) is the fixed price at which the holder of an option can buy (for calls) or sell (for puts) the underlying asset. Strike prices are set at standardized intervals and determine whether an option is in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM). Choosing the right strike is crucial for balancing risk and reward.
Examples
- →A $100 strike call on a stock trading at $105 is $5 in-the-money
- →Lower strikes for calls and higher strikes for puts cost more but have higher probability of profit
❓ Frequently Asked Questions
How do I choose the right strike price?
Consider your directional conviction, risk tolerance, and target return. ATM strikes offer balanced risk/reward, while OTM strikes are cheaper but require larger moves to profit.
Put Your Knowledge to Practice
Use our free options tools to analyze trades, calculate Greeks, and visualize profit/loss scenarios.