Strike Price Definition

Dictionary of Financial Terms

(Also called the exercise price.) The price at which the holder of an option can purchase (in the case of a call) or sell (in the case of a put) the underlying stock from the option writer. If your broker calls you with an idea to buy an October 50 ABC Inc. call, it means the strike price is 50 per share. You target 50 (or any strike price) for a number of reasons. Maybe you're convinced once ABC hits 50 it's going to run to 55 and if it doesn't get there, you want no part of it. To make the trade profitable, the stock price should be higher than the combined price of the strike and the premium paid for the option.

Definitions of Financial Terms