Strike Price

What is the strike price?

Also known as the exercise price, this is the price specified in an option contract at which the underlying futures contract, security, or commodity will move from seller to buyer. (Source: CFTC)

The strike price, or exercise price, is a key variable in a derivatives contract between two parties. Where the contract requires delivery of the underlying instrument, the trade will be at the strike price, regardless of the spot price (market price) of the underlying financial instrument at that time.

"Moneyness" is a term describing the relationship between the strike price of an option and the current trading price of its underlying security. Where settlement is financial, the difference between the strike price and the spot price will determine the value, or "moneyness", of the contract.

In options trading, terms such as in-the-money, at-the-money and out-of-the-money describe the moneyness of options. (Source: Wikipedia)