STRIKE PRICE Meaning and
Definition
-
The term "strike price" is a frequently used concept in the field of finance and investing, particularly in options trading. It refers to the predetermined price at which a specific financial instrument, such as a stock or commodity, can be bought or sold by the option holder on or before a specified expiration date.
In the case of call options, the strike price represents the price at which the option holder can purchase the underlying asset. For example, if an investor holds a call option with a strike price of $50 on a particular stock, it means they have the right to buy the stock at that price. If the stock price exceeds the strike price, it becomes advantageous for the option holder to exercise the option.
On the other hand, in the case of put options, the strike price represents the price at which the option holder can sell the underlying asset. If the strike price is higher than the current market price of the asset, it can represent an opportunity to sell the asset at a profit.
The strike price is crucial in determining the profitability of an option. It allows investors to evaluate the intrinsic value of the option and assess the potential gains or losses. Strike prices often have different intervals and are set by the exchange or market where the option is traded.
Overall, the strike price is a vital component in options trading as it determines the price at which the option holder can exercise their right to buy or sell the underlying asset. It is a key factor in calculating the potential profitability of options and plays a significant role in investment decision-making.
Common Misspellings for STRIKE PRICE
- atrike price
- ztrike price
- xtrike price
- dtrike price
- etrike price
- wtrike price
- srrike price
- sfrike price
- sgrike price
- syrike price
- s6rike price
- s5rike price
- steike price
- stdike price
- stfike price
- sttike price
- st5ike price
- st4ike price
- struke price
- strjke price
Etymology of STRIKE PRICE
The etymology of the word "strike price" can be traced back to the realm of financial markets and options trading. The term "strike" is derived from the verb "to strike", which means to hit forcibly or cause an impact. In the context of options trading, the strike price is the specific price at which the underlying asset (such as stocks, commodities, or currencies) can be bought or sold, depending on the type of option.
The use of "strike" in this context refers to the act of executing the option contract by either buying or selling the underlying asset at the agreed-upon price. The strike price is the level at which the option is "struck" or exercised, determining the profitability and value of the option based on the market conditions and the price at which the underlying asset is traded.
Infographic
Add the infographic to your website:
