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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
The price at which you can buy or sell using an option contract.
Why It Matters
Strike price determines your breakeven and profit potential. A $100 call on a $95 stock needs the stock above $100 to have value at expiration. Choose strikes too far away and you'll pay less but rarely profit.
Key Points
- In-the-money (ITM): strike is favorable vs current price - more expensive but safer
- Out-of-the-money (OTM): strike requires stock movement to profit - cheaper but riskier
- At-the-money (ATM): strike equals current stock price - balanced risk/reward
Related Terms
Common Questions
The price at which you can buy or sell using an option contract. Strike price determines your breakeven and profit potential. A $100 call on a $95 stock needs the stock above $100 to have value at expiration.
Strike price determines your breakeven and profit potential. A $100 call on a $95 stock needs the stock above $100 to have value at expiration. Choose strikes too far away and you'll pay less but rarely profit.
In-the-money (ITM): strike is favorable vs current price - more expensive but safer
Out-of-the-money (OTM): strike requires stock movement to profit - cheaper but riskier
At-the-money (ATM): strike equals current stock price - balanced risk/reward