Exercise Price

What is the 'Exercise Price'

The exercise price is 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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RELATED FAQS
  1. How do I change my strike price once the trade has been placed already?

    Learn how the strike prices for call and put options work, and understand how different types of options can be exercised ... Read Answer >>
  2. After exercising a put option, can I still hold my option contract in order to sell ...

    Once a put option contract has been exercised, that contract does not exist anymore. A put option grants you the right to ... Read Answer >>
  3. How is a put option exercised?

    A put option is a contract that gives the option holder the right, but not obligation, to sell a set amount of shares (1 ... Read Answer >>
  4. How are call options priced?

    Learn how aspects of an underlying security such as stock price and potential for fluctuations in that price, affect the ... Read Answer >>
  5. When holding an option through expiration date, are you automatically paid any profits, ...

    Holding an option through the expiration date without selling does not automatically guarantee you profits, but it might ... Read Answer >>
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