Trading term
What is Strike price?
The strike price is the fixed price at which an option lets its holder buy (for a call) or sell (for a put) the underlying asset. It's the reference point that determines whether an option has value — the relationship between the strike and the market price is what makes an option profitable or worthless.
Every option contract is defined by its strike. A $50 call gives the right to buy at $50; a $50 put, the right to sell at $50 — regardless of where the stock actually trades. The strike is chosen when the option is bought, from a ladder of available strikes above and below the current price. It never changes over the life of the contract; what changes is the market price relative to it.
The strike is the hinge of an option's value. For a call, the further the stock rises above the strike, the more the option is worth (it's 'in the money'); below the strike it has no intrinsic value ('out of the money'). Puts are the reverse. Choosing a strike is a core decision: a strike close to the current price costs more premium but needs a smaller move to profit, while a far-away (out-of-the-money) strike is cheap but needs a big move. The strike sets both the cost and the odds.
On this $50 call, the strike is where the payoff bends: below it the option has no value; above it, value grows one-for-one with the stock. Every option is defined by its strike.
For example
With a stock at $52, a $50 call is 'in the money' by $2 (you could buy at $50, worth $52). A $55 call on the same stock is 'out of the money' — the $55 strike is above the market, so it has no intrinsic value yet and costs less.
Go hands-on in Premium
That's Strike price in theory — it clicks when you read it on a live chart. Practise it hands-on in the TradeWize Premium Options track.
Explore Premium →Why it matters to you
The strike price is the single choice that shapes an option trade's cost, risk, and probability all at once — pick it well and you balance premium against the move you need. Understanding strikes is the gateway to everything in options, because moneyness, breakeven, and every strategy are defined relative to the strike.
⚠ Cheap far-out strikes are cheap for a reason
Beginners are drawn to far out-of-the-money strikes because the premium is tiny and the potential percentage return looks huge. But those strikes are cheap because they're unlikely to pay off — the stock has to make a big move fast. Buying deep-OTM strikes repeatedly is a common way to bleed premium on lottery tickets that usually expire worthless.