Options & Derivatives

Strike Price

Also known as: Exercise Price

The fixed price at which an option holder may buy or sell the underlying asset.

Fixed at inception, and the reference point for moneyness.

Traders name strikes by delta, not by price. A "25-delta put" is a strike whose delta is -0.25, which is roughly a 25% chance of finishing in the money. This is preferred because it stays meaningful as the underlying moves and across different assets, whereas a fixed price does not.

Quoting in delta terms also makes strikes comparable across expiries, since a 25-delta strike is much further from spot at one year than at one week.

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