strike price

Definition

The specified price on an option contract at which the contract may be exercised, whereby a call option buyer can buy the underlier or a put option buyer can sell the underlier. The buyer's profit from exercising the option is the amount by which the strike price exceeds the spot price (in the case of a put), or the amount by which the spot price exceeds the strike price (in the case of a call). In general, the smaller the difference between spot and strike price, the higher the option premium. also called exercise price.

Use strike price in a sentence

The strike price that we agreed upon in the contract was much too low for my taste, but much too high for the other company's taste.

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We had informed the broker of the strike price so we were able to go home that day knowing the transaction would occur as we desired.

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My hedge fund manager was very happy the stock market jumped this week because he had bought a lot of call options at a lower strike price and now would make a lot of money.

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call break-even point