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)

Spread

What is the spread?

The "spread" is the difference between the "bid" price and the "ask" price on over-the-counter market securities. The term "bid" refers to the highest price a market maker will pay at any given time to purchase a specified number of shares of a stock. The term "ask" refers to the lowest price at which a market maker will sell the stock.

The ask price (also known as the "offer" price) will almost always be higher than the bid price. Market makers make their money on the spread. (Source: SEC)

The bid/offer spread (also known as bid/ask spread) is the difference between the buying (bid) and selling (offer) price of the same transaction (eg stock, futures contracts, options, currency).

The ask (offer) prices are immediate execution (market) prices for quick buyers (ask takers); bid prices for quick sellers (bid takers). If a trade is executed at market prices, closing that trade immediately without queuing would not get you back the amount paid because of the bid/ask difference. (Source: Wikipedia)

Pip

What is a pip?

A pip is the smallest price unit of a commodity or currency.
(Source: CFTC)

Pip is an acronym for the following terms, which all have the same meaning:

• Price Interest Point
• Percentage in Point
• Percentage Increment Point

One pip is the smallest measure of Price move used in forex trading. For instance, if the currency pair EUR/USD is currently trading at 1.3000 and then the exchange rate changes to 1.3010, the pair did a 10 pips (smallest units) move. The pip is the smallest measure regardless of the fractional representation of the currency exchange rate. Thus, 1.3000 to 1.3010 is the same move in pips terms as 110.00 to 110.10. (Source: Wikipedia)

Bid Price

What is the bid price?

An offer to buy a specific quantity of a commodity at a stated price. (Source: CFTC)

The ask price (also known as the "offer" price) will almost always be higher than the bid price. Market makers make money on the difference between the bid price and the ask price. That difference is called the "spread". (Source: SEC)

A price mechanism or market-based method is any of a wide variety of ways to match up offers and requests that market players bid and ask.

A bid is an offer to pay a fixed amount that is held open for a period of time.

The main advantage of such methods is that conditions are laid out in advance and transactions can proceed with no further permission or authorization from any participant. When any bid and ask pair are compatible, a transaction occurs, in most cases automatically. (Source: Wikipedia)

See also:
Ask Price
Spread

Ask or Offer Price

What is the ask, or offer, price?

The price level of an offer, as in bid-ask spread. (Source: CFTC)

The ask price (also known as the "offer" price) will almost always be higher than the bid price. Market makers make money on the difference between the bid price and the ask price. That difference is called the "spread". (Source: SEC)

A price mechanism or market-based method is any of a wide variety of ways to match up offers and requests that market players bid and ask. An ask is an offer to sell for a fixed amount that is held open for a period of time. The main advantage of such methods is that conditions are laid out in advance and transactions can proceed with no further permission or authorization from any participant. When any bid and ask pair are compatible, a transaction occurs, in most cases automatically. (Source: Wikipedia)

See also:
Bid Price
Spread