In Options, What Is the Strike Price?
A strike price, also referred to as an execution price, represents the price at which a securities contract may be exercised, that is either bought or sold. It is most common in options trading. Options are derivative contracts that provide investors with the “option” to purchase or sell an asset, such as a stock, when it reaches a strike price. When used effectively, an options strike price can significantly enhance an investors holdings, but under certain conditions may also seriously hurt returns. In options trading there are two types of contracts, including a call option and a put option. A strike price in a call option represents the price at which the security can be purchased through the contract’s expiration date. Conversely, a strike price on a put option determines the price at which a contract may be sold within the life of the contract.
