Strike Price

What is a Strike Price?

The strike price of an option is simply a contractual price per share at which an option holder can exercise their right to buy or sell the underlying security that the option contract is based upon.  For this reason, strike price is also referred to as the "exercise price" of an option.  At options expiration, the holder of a call option that is in the money will by the underlying security at the strike price of the options contract.  Conversely, the purchaser of a put option will have the right to force the seller of the put to purchase the stock at the strike price.

The profit of any options contract is the intrinsic value which can be derived by calculating the difference between the price of the stock at expiration and the strike price of the option.