Strike price

The fixed price at which an option can be exercised — the reference point around which a call or put pays off.

The strike price is the price at which an option lets you buy (with a call) or sell (with a put) the underlying, if you decide to exercise. It's fixed the moment the contract is created and never changes, so it acts as the reference point for everything else: whether the option is in or out of the money, how much premium it costs, and how fast its value moves as the stock shifts.

In practice you pick a strike based on where you think the stock is going and how much you're willing to pay. Say a stock trades at 100. A call with a 105 strike is cheaper because the stock still has to climb 5 points before it has any intrinsic value, while a 95 strike call already carries real value built in and costs more. Lower-priced far-out strikes look tempting, but they only pay off if the move is large enough within the time you have.

A common mistake is treating a cheap strike as a good deal on its own. An out-of-the-money option can lose its entire premium even if the stock rises, simply because it never reached the strike before expiration. Always read the strike together with the expiry date and the distance the price actually has to travel.

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Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.