Strike Price

The strike price is set when the option is created and does not change during the option's life. It is the central reference point for whether an option is worth exercising.

For a call option, the option has value at expiry if the market price is above the strike price. For a put option, it has value if the market price is below the strike price. For example, a call with a strike price of 100 is worth 15 at expiry if the share trades at 115, but worthless if the share trades at 95.

Exchange-traded options are available at a range of strike prices for each underlying asset and expiry date. Investors choose a strike based on their views and goals. Options with strike prices closer to the current price, or more favourable, cost more because they are more likely to pay off.

The relationship between the strike price and the current market price determines an option's moneyness: whether it is in the money, at the money or out of the money.

Note: Exercise price means the same as strike price. Both describe the fixed price at which an option can be exercised.