In options, the strike price (or exercise price) is the fixed price at which the owner of an option can purchase (in the case of a call), or sell (in the case of a put), the underlying security or commodity.
The strike price is a key variable in a derivatives contract between two parties. Where the contract requires delivery of the underlying instrument, the trade will be at the strike price, regardless of the spot price (market price) of the underlying instrument at that time.
For example, an IBM May 50 Call has a strike price of $50 a share. When the option is exercised the owner of the option will buy 100 shares of IBM stock for $50 per share.
Read more about Strike Price: Moneyness
Famous quotes containing the words strike and/or price:
“We don’t arrive at it by standing on one leg or on the first day of our setting out—but though we may jostle one another on the way that is no reason why we should strike or trample—elbowing’s enough.”
—George Gordon Noel Byron (1788–1824)
“This state is full of these log cabin Abe Lincolns with price tags on ‘em. The louder he yells, the higher his price.”
—Robert Rossen (1908–1966)