what is a strike price 
long options contracts are derivatives that give the holders the right but not the obligation to buy or sell an underlying security at some point in the future at a pre specified price this price is known as the option s strike price or exercise price the strike price of a call option is where the security can be bought by the option holder the strike price of a put option is the price at which the security can be sold an option s value is informed by the difference between the fixed strike price and the market price of the underlying security known as the option s moneyness call option strikes that are lower than the market price are said to be in the money itm because you can exercise the option to buy the stock for less than the market and immediately sell it at the higher market price in the money puts are those with strikes higher than the market price giving the holder the right to sell the option above the current market price this feature grants itm options intrinsic value calls with strikes that are higher than the market or puts with strikes lower than the market are instead out of the money otm and only have extrinsic value also known as time value investopedia sydney saporitounderstanding strike pricesthe strike price is a key variable of call and put options it defines at which price the option holder can buy or sell the underlying security respectively options are listed with several strike prices both above and below the current market value say that a stock is trading at 100 per share the 110 strike call option would give the holder the right to buy the stock at 110 on or before the date when the contract expires the option would lose value if the stock falls in value as the underlying stock increases in price but the call will expire worthless if it never reaches 110 before the expiration date because you could buy the stock for less you could still exercise the option to pay 110 if the stock did rise above 110 even though the market price is higher put options would work similarly but give you the right to sell rather than buy the underlying security the strike prices listed are also standardized they re at fixed dollar amounts such as 31 32 33 100 or 105 they may also have 2 50 intervals such as 12 50 15 00 and 17 50 the distance between strikes is known as the strike width strike prices and widths are set by the options exchanges strikes 1 apart are generally the tightest available on most stocks you may have strikes that result in 0 50 or tighter due to stock splits or other events the relationship between strike price and the underlying securitythe price of an options contract is known as its premium it s the amount of money that the buyer of an option pays to the seller for the right but not the obligation to exercise the option the price difference between the underlying security s market price and the strike price determines an option s value in what s known as the moneyness of the option the more in the money an option is the higher its premium options become more valuable as the difference between the strike and the underlying gets smaller they re in the money when the strike becomes greater an option will lose value as the difference between the strike and the underlying price becomes larger and as the option falls out of the money moneyness the three types of strike pricesoptions can be in the money itm out of the money otm or at the money atm 1the option is out of the money otm for buyers of the call option if the strike price is higher than the underlying stock price the option doesn t have intrinsic value but it s likely to still have extrinsic value based on volatility and time until expiration because either of these two factors could put the option in the money in the future the option will have intrinsic value and be in the money if the underlying stock price is above the strike price puts with strike prices higher than the current price will be in the money because you can sell the stock higher than the market price and then buy it back for a guaranteed profit a put option will instead be in the money when the underlying stock price is below the strike price and be out of the money when the underlying stock price is above the strike price again an otm option won t have intrinsic value but it may still have value based on the volatility of the underlying asset and the time left until option expiration finally an option with a strike price at or very near to the current market price is known as at the money atm atm options are often the most liquid and active options traded in a name investopedia sabrina jiangstrike price and option deltaan option s delta is how much its premium will change given a 1 move in the underlying security a call with a 0 40 delta will rise by 40 cents if the underlying rises by a dollar at the money calls have a delta of 0 50 at the money puts have a delta of 0 50 options that are in the money will have deltas greater than 0 50 positively for calls and negatively for puts and out of the money options will have deltas of less than 0 50 an option with a delta of 1 00 is so deep in the money that it essentially behaves like the stock itself examples would be call options very far below the current price and puts with strikes very high above it deep out of the money options have deltas very close to zero and are essentially worthless because they re calls that have strikes so high above the market or puts with strikes so far below it that it s extremely unlikely they ll ever be in the money before expiry 