Strike Price: Where Profit Begins or Ends | #OptionsHandbook EP008
Buying an option is like getting a voucher for a future deal at a set price, called the strike price.
But whether that deal ends in profit or becomes worthless depends on what kind of price you've locked in.
📘 Why is the strike price such a big deal? Let the Options Handbook show you！
▶ Where Profit Begins or Ends 💡
The strike price is the deal you're agreeing to in advance. It's the price at which you'll buy (for calls) or sell (for puts) the stock if you exercise the option.
▶ Quick Example 📊
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Say you hold a call with a strike price of $400.
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If the stock is trading at $380 on the expiration date, then that call isn't worth exercising. After all, you wouldn't choose to buy the stock for $400 when you could purchase it in the market for just $380.
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But if the stock rises to $450? Suddenly, your right to buy at $400 becomes valuable. That price gap is where profit starts.
Here, both the strike price and market price mean the price of the stock behind the option.
🎁 You’ll find more easy-to-understand option terms in the Options Handbook—now available in the Tiger Coin Center! 🐯✨
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