What is Strike Price?
The strike price is the predetermined price at which an option holder can buy (call) or sell (put) the underlying asset. It's the reference point that determines whether an option is profitable.
Strike Price Explained
For calls, the option has intrinsic value when the stock price is above the strike. For puts, intrinsic value exists when the stock is below the strike. Options with strike prices close to the current stock price (at-the-money) are the most actively traded and have the highest time value. The relationship between strike price and stock price determines moneyness (in-the-money, at-the-money, out-of-the-money).
Real-World Example
AAPL is at $180. A call with a $175 strike is 'in-the-money' with $5 of intrinsic value. A call with a $180 strike is 'at-the-money.' A call with a $185 strike is 'out-of-the-money' and has no intrinsic value, only time value.
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