What Is the “Strike Price” and Its Role in an Options Contract?

The strike price, or exercise price, is the predetermined price at which the underlying asset can be bought (for a call option) or sold (for a put option) if the option holder chooses to exercise the contract. It is fixed at the time the contract is initiated.

The strike price is critical because it determines the option's intrinsic value and whether the option is in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM) relative to the current market price.