Strike Price
 |
Definition of 'Strike Price'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. |
Related Definitions
Articles Of Interest
-
Manage Risk With Trailing Stops And Protective Put Options
Using the right strategy can lower the risk of failure and protect your profits. -
Costless Collars: Because Asset Allocation Is Not Enough
Collars are extremely flexible, and can be much more beneficial to your portfolio than asset allocation. -
Employee Stock Options (ESO)
Employee stock options are a form of equity compensation granted by companies to their employees and executives. -
Trading Options With The Zero-Cost Cylinder
The zero-cost cylinder allows traders to effectively trade the market while protecting their downside. -
Write Covered Calls To Increase Your IRA Income
Covered calls may require more attention than bonds or mutual funds, but the payoffs can be worth the trouble. -
Conversion Arbitrage
This stock/options combination helps traders take advantage of market mispricing. Find out how. -
The 4 Advantages of Options
Flexible and cost efficient, options are more popular than ever. Find out why. -
Can an option have a negative strike price?
The simple answer is that, at least when it comes to exchange traded options, an option can't have a negative strike price .Remember that an option gives the holder the right, but not the obligation, ... -
How do speculators profit from options?
As a quick summary, options are financial derivatives that give their holders the right to buy or sell a specific asset by a specific time at a given price (strike price). There are two types ... -
Arbitrage Squeezes Profit From Market Inefficiency
This influential strategy capitalizes on the relationship between price and liquidity.
Free Annual Reports
