what is strike price in options

A strike price is the price at which a put or call option can be exercised, also known as the exercise price. It is the price at which the option holder can buy or sell the underlying security when the option is exercised. For call options, the strike price is where the security can be bought by the option holder, while for put options, the strike price is the price at which the security can be sold. The strike price is a key variable of call and put options, which defines at which price the option holder can buy or sell the underlying security, respectively. The difference between the fixed strike price and the market price of the underlying security is known as the options "moneyness" and informs the options value. If the option is "in-the-money" prior to expiration, meaning the underlying stock price has risen to a point above the strike price of the option, then the buyer will profit by the difference between the option strike price and the actual stock price, multiplied by the number of shares in the contract. The strike price is a key decision for an options investor or trader since it has a significant impact on the profitability of the trade. The exchange where the option trades will set the strike price on an option when the options contracts get listed on that exchange.