Exercise price

From MarketsWiki
Revision as of 20:40, 15 May 2019 by JohnJLothian (talk | contribs)
(diff) ← Older revision | Latest revision (diff) | Newer revision → (diff)
Jump to navigation Jump to search

R1 220074 Ad-2-animated.gif

Exercise price (also known as strike price) is the specified price on an option contract at which the contract may be exercised. In other words, a call option buyer can buy the underlier or a put option buyer can sell the underlier.

The buyer's profit from exercising the option is the amount by which the spot price exceeds the exercise price in the case of a call, or the amount by which the exercise price exceeds the spot price in the case of a put. Generally, the smaller the difference between spot and exercise price, the higher the option premium.