◈ GLOSSARY · TRADING & MARKETS
Strike Price.
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
The fixed price at which an option contract can be exercised — where a call buyer can buy the shares, or a put buyer can sell them. Strikes come in standardized increments (often $1, $2.50, or $5 apart depending on the stock's price). The relationship between the strike and the current stock price determines whether the option is in-the-money, at-the-money, or out-of-the-money.
◈ IN PRACTICE
Example
Stock at $100. A $95 call is in-the-money by $5 (intrinsic value). A $100 call is at-the-money. A $110 call is out-of-the-money and has zero intrinsic value — anything you pay for it is pure time and volatility premium.
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