What is strike price
The strike price (also called the exercise price) is the fixed price at which the holder of an option may buy or sell the underlying asset if they exercise the option.
For a call option, it is the price at which the holder can buy. For a put option, it is the price at which the holder can sell. The strike is set when the contract is created and does not move with the market, except in the adjustments described below.
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Strike price example
This is a hypothetical case using letters instead of figures:
- A share trades at price S.
- You hold a call option with strike K, for which you paid a premium P per share.
- At expiry, if S is above K, the option has intrinsic value of S − K per share. Your result after the premium is S − K − P.
- If S is at or below K, the call expires worthless, and you lose the premium P.
The breakeven price for a call buyer is therefore K + P. For a put buyer it is K − P. Multiply the per-share result by the contract size to get the result for the whole contract.
Moneyness: how strike relates to market price
| Term | Call option | Put option |
|---|---|---|
| In the money (ITM) | Market price above strike | Market price below strike |
| At the money (ATM) | Market price at or near strike | Market price at or near strike |
| Out of the money (OTM) | Market price below strike | Market price above strike |
Moneyness affects the premium and the option's delta. Deep ITM options move almost like the underlying. Far OTM options are cheap but often expire worthless.
Where the term appears
- Option chains on exchange and broker platforms list contracts by strike, usually in a central "Strike" column with calls on one side and puts on the other.
- Contract codes often include the underlying, the expiry date, call or put, and the strike.
- Trade confirmations and statements for options show the strike next to the premium and quantity.
- Market news mentions strikes when it reports large open interest or heavy trading at a particular strike level.
Spot forex and CFDs on currency pairs, metals or indices do not have a strike price, because they are not option contracts.
Formal definition and edge cases
- Exercise style. For American-style options, the strike applies on any day up to expiry. For European-style options, it applies only at expiry.
- Settlement. At exercise, the strike is either paid for real delivery of the underlying, or used to calculate a cash difference. See cash vs physical settlement.
- Adjusted strikes. After stock splits, special dividends or mergers, exchanges may adjust the strike and the contract size so that the position keeps its economic value.
- Strike intervals. Exchanges list strikes at set steps around the current price, so not every price level is available.
- Other products. Warrants and employee stock options also have an exercise price. Some structured products have several strikes or barrier levels.
Risk
Buying options can lose the whole premium. Selling (writing) options can lose much more than the premium received. Leveraged derivatives can lose money fast. For position sizing and loss limits, see risk management.
Related terms
Call option · Delta · Expiry date · Derivatives · Forward contract · Contract size · Trading glossary
Frequent questions
What does strike price mean in simple words?
It is the agreed price at which an option lets you buy (call) or sell (put) the underlying asset.
Does the strike price change during the life of an option?
Normally it does not. Exchanges may adjust it after corporate actions such as splits.
Is the strike price the same as the premium?
No. The premium is what you pay to buy the option. The strike is the price used if the option is exercised.
How is the strike price related to breakeven?
For a call buyer, breakeven is the strike plus the premium. For a put buyer, it is the strike minus the premium.
Do forex CFDs have a strike price?
No. A strike price exists only in options and similar contracts such as warrants.