Strike Price
Strike price is the price at which an option buyer can buy or sell the underlying asset. It is also known as the exercise price or the striking price. The strike price is determined at the time of purchase of the option and is fixed for the duration of the option contract. The strike price is important because it is the price at which the option buyer can exercise their right to buy or sell the underlying asset.
History of Strike Price
The concept of strike price has been around since the early days of options trading. The first recorded use of the term was in the early 19th century when it was used to describe the price at which a commodity option was to be exercised. Since then, the term has been used in various contexts, including in the stock market, futures market, and foreign exchange market.
The strike price is an important factor in determining the value of an option. It is used to calculate the intrinsic value of an option, which is the difference between the strike price and the current market price of the underlying asset. The strike price also affects the time value of an option, which is the difference between the option’s premium and its intrinsic value.
Comparison Table
| Strike Price | Underlying Asset Price | Intrinsic Value |
|---|---|---|
| $50 | $60 | $10 |
| $50 | $45 | $0 |
| $50 | $55 | $5 |
Summary
Strike price is an important factor in determining the value of an option. It is the price at which an option buyer can buy or sell the underlying asset. The strike price is determined at the time of purchase of the option and is fixed for the duration of the option contract. The strike price is used to calculate the intrinsic value of an option, which is the difference between the strike price and the current market price of the underlying asset. For more information about strike price, you can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Option Premium
- Option Expiration Date
- Option Moneyness
- Option Delta
- Option Gamma
- Option Vega
- Option Theta
- Option Rho
- Option Volatility
- Option Time Decay
