Strike price

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In options, the strike price, or exercise price, is a key variable in a derivatives contract between two parties. Where the contract requires delivery of the underlying instrument, the trade will be at the strike price, [color=Blue]regardless of the spot price (market price) of the underlying instrument at that time[/color].

Definition - The fixed price at which the owner of an option can purchase (in the case of a call), or sell (in the case of a put), the underlying security or commodity. It's the price at which the stock will be bought or sold when the option is exercised.

The strike price is often called the exercise price.

For example, an IBM May 50 Call has a strike/exercise price of $50 a share. When the option is exercised the owner of the option will buy (Call option) 100 shares of IBM stock for $50 a share.

[url] http://en.wikipedia.org/wiki/Strike_price [/url]