Strike price
A strike price is the predetermined price at which an option holder may buy or sell the underlying asset when exercising the option.
Investing for Programmers
The strike price is the predetermined price at which an option holder may buy or sell the underlying asset.
- How it is used
- Frames the strike price as the operating condition for buying, selling, hedging, or speculating with options.
- How deep it goes
- Defines the term and illustrates obligations through covered calls and cash-secured puts, while warning about advanced strategy risk.
- Examples
- Uses a $110 covered call, a lower-strike cash-secured put, and an Enron-collapse scenario to expose payoff and downside risks.
- What you can do after
- Evaluate how an option’s strike price determines exercise rights, seller obligations, potential gains, and potentially severe losses.
Tech Startup Toolkit
A strike price is the predetermined price an option holder pays to purchase the underlying shares.
- How it is used
- Explains the price employees pay to exercise vested stock options and turn them into shares.
- How deep it goes
- Defines exercise and relates strike price to vesting, expiration, ownership, and later sale without detailing valuation.
- Examples
- Contrasts employee option exercise with founders paying $50 for 500,000 founder shares.
- What you can do after
- Evaluate the cash cost of converting vested options into shares.
Related concepts
- employee stock optionconfigures · An employee stock option is a contractual right granted to an employee to purchase company shares at a specified price during a permitted period.
- stock share pricecontrasts with · A stock share price is the market value of one share of a publicly traded company or security at a particular time.
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