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:
“There is a certain class of unbelievers who sometimes ask me such questions as, if I think that I can live on vegetable food alone; and to strike at the root of the matter at once,—for the root is faith,—I am accustomed to answer such, that I can live on board nails. If they cannot understand that, they cannot understand much that I have to say.”
—Henry David Thoreau (1817–1862)
“They give us a pair of cloth shorts twice a year for all our clothing. When we work in the sugar mills and catch our finger in the millstone, they cut off our hand; when we try to run away, they cut off our leg: both things have happened to me. It is at this price that you eat sugar in Europe.”
—Voltaire [François Marie Arouet] (1694–1778)