How Is the ‘Strike Price’ Determined in an Options Contract?

The strike price, or exercise price, is the fixed price at which the underlying asset can be bought or sold when the option is exercised. It is set at the time the contract is created.

Traders choose a strike price based on their market outlook and risk tolerance. The relationship between the strike price and the current market price determines if the option is in-the-money, at-the-money, or out-of-the-money.