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Strike Price

In short

The fixed price at which an option can be exercised

The strike price is the agreed price in the option contract. For a call, you can buy the stock at the strike. For a put, you can sell at the strike. Choose your strike based on how big a move you expect.

The strike price determines an option's intrinsic value and moneyness. Options are listed at standardized strikes (usually $1, $5, or $10 apart). The choice of strike involves a trade-off between premium cost and probability of profit.

Related concepts

  • Call Option — A call option is like a coupon that lets you buy a stock at today's price even in the future. If the stock rises, you profit. If it falls, you only lose what you paid for the coupon (the premium).
  • Put Option — A put option is like insurance for your stocks. If you own shares and buy a put, you can sell them at the strike price even if the stock crashes. You pay a premium for this protection.
  • Moneyness — Moneyness tells you how far the strike price is from the current stock price. At-the-money (ATM) means strike ≈ current price. In-the-money (ITM) means the option has intrinsic value. Out-of-the-money (OTM) means it doesn't yet.
  • Expiration Date — Options have a use-by date. After expiration, they're worthless unless exercised. Shorter expirations are cheaper but give you less time to be right. Longer expirations (LEAPS) cost more but give the trade more time to work.