Exercise Price

DEFINITION of 'Exercise Price'

The price at which the underlying security can be purchased (call option) or sold (put option). The exercise price is determined at the time the option contract is formed.

Also known as the "strike price".

BREAKING DOWN 'Exercise Price'

The exercise price is the key to profiting from options. A difference between the fixed exercise price and the market price at the time the option is exercised is what gives it value. Generally, the greater the difference between the exercise and market price at the time an option contract is written, the higher the premium required to purchase the option.

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