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)
“I was like a social worker for lepers. My clients had a chunk of their body they wanted to give away; for a price I was there to receive it. Crimes, sins, nightmares, hunks of hair: it was surprising how many of them has something to dispose of. The more I charged, the easier it was for them to breathe freely once more.”
—Tama Janowitz (b. 1957)