Glossary term
Strike Price
The agreed price at which the underlying shares change hands if an option is exercised; the reference point for all options pricing.
Strike Price is the agreed price at which the underlying shares change hands if an option is exercised. It is the fixed reference point that decides whether an option is in-, at-, or out-of-the-money and how much intrinsic value it carries at any moment.
It matters because strike selection is the main lever a trader has over probability of profit and risk-reward. A strike far out-of-the-money collects a smaller premium but has a lower chance of being assigned; a strike near or in-the-money collects more premium and carries more obligation. Every options position is, at heart, a choice of strike against expiry.
Closelooknet treats strike choice as the central decision in the income strategies it documents, such as covered-call writing and cash-secured puts, where the strike sets the trade-off between premium collected and the price at which stock is called away or assigned.
In practice, with a stock at $100, selling a $110 covered call keeps the premium unless the stock rises past $110, while selling a $95 cash-secured put commits the seller to buy at $95 if the stock falls there: two different strikes expressing two different intentions on the same underlying.