What Is the ‘Strike Price’ of an Option, and Why Is It Critical for Profitability?

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 is exercised. It is critical for profitability because the option holder profits only if the underlying asset's market price moves favorably past the strike price plus the premium paid.

For a call, the market price must be above the strike price at expiration to be 'in-the-money'.