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Strike Price
The predetermined price at which an option holder can buy or sell the underlying asset.
Strike Price
The strike price (or exercise price) is the price at which the option holder can buy (call) or sell (put) the underlying asset.
Relationship to stock price
- In the money (ITM): Call strike below stock price; put strike above stock price
- At the money (ATM): Strike equals or is nearest to current stock price
- Out of the money (OTM): Call strike above stock price; put strike below stock price
How strike price affects option value
- Deeper ITM: Higher premium, more intrinsic value, higher delta
- ATM: Highest time value, moderate premium
- Further OTM: Lower premium, lower probability of profit, higher leverage
Choosing a strike price
- Conservative: ITM options for higher probability trades
- Moderate: ATM for balanced risk/reward
- Aggressive: OTM for maximum leverage (but lower success rate)
Key insight
The strike price is fixed when you buy or sell the option. It does not change, even as the stock price moves.
Key Takeaways
- Context matters when interpreting any financial metric.
- Combine multiple data points for informed decisions.
- Continue learning to build investment knowledge.
Quick Reference
Category
Derivatives
Difficulty
Beginner
Reading Time
1 min
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Where You'll See This
This concept appears throughout stock detail pages and financial data.