Define: Striking Price

The striking price, also known as the exercise price, is the predetermined price at which the underlying asset can be bought or sold when exercising an options contract.

The striking price is determined by the options exchange and is typically set based on the current market price of the underlying asset at the time the options contract is created.

No, once an options contract is created, the striking price remains fixed and cannot be changed.

If the market price of the underlying asset is above the striking price for a call option, it is considered “in the money,” and the option holder can exercise the option to buy the asset at the striking price.

If the market price of the underlying asset is below the striking price for a put option, it is considered “in the money,” and the option holder can exercise the option to sell the asset at the striking price.

Yes, the striking price can impact the premium of an options contract. Generally, options with striking prices closer to the current market price of the underlying asset tend to have higher premiums.

If the market price of the underlying asset is equal to the striking price, the option is considered “at the money.” In this case, the option holder may choose to exercise the option or let it expire worthless.

In some cases, corporate actions such as stock splits or mergers may lead to adjustments in the striking price of options contracts. These adjustments are made to ensure the contract’s value remains unaffected by the corporate action.

No, the striking price is determined by the options exchange and is not negotiable between the buyer and seller of an options contract.

The profitability of an options trade depends on various factors, including the difference between the market price of the underlying asset and the striking price. If the market price moves significantly in favor of the option holder, the trade can be more profitable.