Define the ‘Strike Price’ and Its Role in an Option

The strike price, also known as the exercise price, is the predetermined price at which the holder of the option contract can buy or sell the underlying asset. Its role is crucial as it determines whether the option is profitable (in-the-money) at expiration or exercise.

The difference between the strike price and the current market price of the underlying asset is the basis for calculating the option's intrinsic value.