Glossary
Strike price
The fixed price at which an option holder can buy (call) or sell (put) the underlying asset, set when the contract is created.
On this page
The strike price, or exercise price, is the price written into an option contract at which the holder may buy the underlying asset (for a call) or sell it (for a put). It never changes over the life of a standard contract, except for adjustments after events such as stock splits. The relationship between the strike and the current market price decides whether an option has any exercise value, which is why the strike is the first number options traders look at.
How it works
Exchanges list a ladder of strikes for each expiration, spaced in steps such as $1, $2.50 or $5 depending on the stock's price and how actively it trades. Choosing a strike sets the option's moneyness:
- A call is in the money when the stock is above the strike; a put is in the money when the stock is below it.
- An option is at the money when the strike is at or very near the stock price.
- Otherwise it is out of the money and has only time value.
Choosing between strikes
Lower call strikes cost more but behave more like the stock itself, with a higher delta. Higher strikes are cheaper and offer more leverage, with a lower chance of finishing in the money. There is no free lunch in the choice: the market prices each strike so that the cheaper ones are cheaper because they pay off less often.