Explain the “Strike Price” and Its Significance in Determining an Option’s Profitability

The strike price, or exercise price, is the fixed price at which the option holder has the right to buy (call) or sell (put) the underlying asset. It is the crucial benchmark for determining whether an option is in-the-money and therefore profitable to exercise.

For a call, profitability occurs when the market price is above the strike; for a put, when the market price is below the strike.