Definition:
The strike price is defined as the price at which the holder of an options can buy (in the case of a call option) or sell (in the case of a put option) the underlying security when the option is exercised. Hence, strike price is also known as exercise price.

Strike Price, Option Premium & Moneyness

When comparing options on the same underlying with the same expiration and contract terms, the strike price affects the option’s premium and moneyness. The following tables are hypothetical teaching inputs, not market quotes. All amounts are per share.

Relationship between Strike Price & Call Option Price

For call options, the higher the strike price, the cheaper the option. The following table lists option illustrative premiums for near-term call options at various strike prices when the underlying stock is trading at $50

Strike Price Moneyness Call Option Premium Intrinsic Value Time Value
35 ITM $15.50 $15 $0.50
40 ITM $11.25 $10 $1.25
45 ITM $7 $5 $2
50 ATM $4.50 $0 $4.50
55 OTM $2.50 $0 $2.50
60 OTM $1.50 $0 $1.50
65 OTM $0.75 $0 $0.75

Relationship between Strike Price & Put Option Price

Conversely, for put options, the higher the strike price, the more expensive the option. The following table lists option illustrative premiums for near-term put options at various strike prices when the underlying stock is trading at $50

Strike Price Moneyness Put Option Premium Intrinsic Value Time Value
35 OTM $0.75 $0 $0.75
40 OTM $1.50 $0 $1.50
45 OTM $2.50 $0 $2.50
50 ATM $4.50 $0 $4.50
55 ITM $7 $5 $2
60 ITM $11.25 $10 $1.25
65 ITM $15.50 $15 $0.50

Strike Price Intervals

Strike intervals depend on the product, exchange listing program, series and market conditions. There is no universal rule assigning $2.50, $5 or $10 intervals from a stock’s price, nor a single interval for all index or futures options. Read the strikes in the actual option chain and check the exchange specifications.

Content reviewed:

References: OIC options basics; OIC assignment; OCC contract adjustments. Editorial standards.