Strike definition

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In options trading, the strike is the price at which a contract can be exercised, and the price at which the underlying asset will be bought or sold. It is also known as the strike price.

If the option is a call, then when the underlying asset hits the strike price it can be bought. If the option is a put, then hitting the strike price means the underlying asset can be sold. In order for an option to be exercised, it must reach its strike price before its expiration date. The more the asset price moves beyond the strike price, the more profit is derived from the option.

When the underlying asset in an option matches its strike price, the option is known as being at the money. When it exceeds the strike price, it is in the money.

Strike price compared to current market is a key determining factor in the premium charged for an option. Other key factors are time to expiry and volatility of the underlying asset.

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