Strike Price
A strike price is the fixed price written into an options contract at which the underlying stock can be bought or sold if the option is exercised. It's set when the contract is created and never changes for the life of that contract, no matter where the actual stock price moves afterward.
An option gives its buyer the right, but not the obligation, to trade the stock at the strike price. With a call option, the strike is the price you get to buy the stock at. With a put option, the strike is the price you get to sell the stock at. The relationship between the current stock price and the strike determines whether the option has intrinsic value: a call is worth exercising only if the stock is trading above the strike, and a put only if the stock is trading below it.
The nuance beginners trip over is that the strike price is not the same as the option's price (the premium). The premium is what you pay to buy the contract; the strike is the price baked into the contract itself. You can buy an option with a strike far from the current stock price and pay very little for it, or one close to the current price and pay a lot more, because how far the strike sits from the stock price (and how much time is left) drives the premium.
Every stock has multiple strike prices listed at once, spaced at set intervals above and below the current price, across multiple expiration dates. Traders pick a strike based on how much movement they expect and how much risk or cost they're willing to take on.
Day traders using options need the strike to judge how far the stock has to move, and how fast, before the position is even profitable — pick a strike too far away and a correct directional call can still lose money by expiration or by the time you exit.
A stock is trading at $50. A trader buys a call option with a strike price of $52, paying a $1.20 premium per share. If the stock rises to $55 before the option expires, that call has $3 of intrinsic value ($55 minus the $52 strike), well above the $1.20 paid. If the stock stays at $49, the option expires worthless because no one would exercise the right to buy at $52 when the stock is cheaper on the open market.
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