Strike Price

The price at which a specific derivative contract can be exercised. Strike prices is mostly used to describe stock and index options, in which strike prices are fixed in the contract. For call options, the strike price is where the security can be bought (up to the expiration date), while for put options the strike price is the price at which shares can be sold.

The difference between the underlying security's current market price and the option's strike price repsents the amount of profit per share gained upon the exercise or the sale of the option. This is true for options that are in the money; the maximum amount that can be lost is the pmium paid.

Also known as the "exercise price".

Taobiz explains Strike Price

Strike prices are one of the key determinants of the pmium, which repsents the market value of an options contract. Other determinants include the time until expiration, the volatility of the underlying security and pvailing interest rates. Strike prices are established when a contract is first written. Most strike prices are in increments of $2.50 and $5.