The strike price, also called the exercise price, is the price at which you as an options holder can buy or sell the stock or other financial instrument underlying the options contract if you choose to exercise before expiration.
While the strike price is set by the exchange on which the option trades, and changes only if there's a stock split, merger, or some other corporate action that affects the underlying instrument, the market price of the underlying instrument rises and falls during the life of the contract.
As a result, the underlying instrument might reach a price that would put the strike price in-the-money and make exercising the option at the strike price, or selling the option in the marketplace financially advantageous, or it might not. If not, you let the option expire.
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- At-the-money, Automatic exercise, Delta, Exercise, Exercise price, Green shoe clause, Incentive stock option (ISO), Option premium, Options class, Options Clearing Corporation (OCC)
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