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:
“Submission is the only good;
Let me become an instrument sharply stringed
For all things to strike music as they please.”
—Philip Larkin (1922–1986)
“A bargain is in its very essence a hostile transaction ... do not all men try to abate the price of all they buy? I contend that a bargain even between brethren is a declaration of war.”
—George Gordon Noel Byron (1788–1824)