If you’re interested in buying or selling options, you’ll need to understand strike prices. This explainer will help. Learn more in the MoneySense Glossary.
The strike price of an option contract is the price at which the holder can buy or sell the underlying security. Call options allow you to buy the security at the strike price, regardless of the current market price. For instance, if a stock is trading at $50, the owner of a call with a $40 strike price can purchase the stock for $40. The strike price of a put option is the price at which you can sell the security by exercising the option.
Example: “After Mohammed’s shares in the company rose from $80 to $100, he bought a put option with an $80 strike price, giving him the option to sell at $80 and protect his gain should the price decline.”
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
Should you plan your retirement savings around paying the...
What is Canada’s First-Time Home Buyer Incentive program and...
The Consumer Price Index shows inflation is starting to...
Nicholas Hui is an advice-only Certified Financial Planner based...
Watch your money grow—or calculate how much money you...
The failure of Silicon Valley Bank has highlighted risks...
Janet Gray is a Certified Financial Planner, speaker and...
Adyen’s Canadian manager tackles the My MoneySense questionnaire, revealing...
Banks collapse, U.S. inflation puts the Fed in a...
