Options 101 Course

Introduction to Options

Exercise (or Strike) Price

The exercise (or strike) price is the fixed price at which the option can be exercised.

So if you buy a call option which has a strike price of 50.00, then you have bought yourself the option to buy the asset at a price of $50.00.

However, in the real world you only want to exercise your right to buy that asset at $50.00 if the underlying asset is actually worth more than $50.00 in the market.  If the underlying asset is below $50.00, there is no point in doing so because you'd be exercising your right to buy the asset for $50.00, when it's only actually worth, say, $40.00.  No-one would do that because they could buy it for $40.00 in the market.

This leads us to the words "before a predetermined date"



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