What Is the Significance of the “Strike Price” in an Option Contract?

The strike price, also known as the exercise price, is the predetermined price at which the underlying asset can be bought or sold when the option is exercised. It is the critical benchmark for determining whether an option is in-the-money, at-the-money, or out-of-the-money.

The relationship between the strike price and the current market price of the underlying asset determines the intrinsic value of the option. It is a fixed term specified at the contract's inception.