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:
“Man, at least when educated, is a pessimist. He believes it safer not to reflect on his achievements; Jove is known to strike such people down.”
—John Kenneth Galbraith (b. 1908)
“Money won is twice as sweet as money earned.”
—Richard Price (b. 1949)