Strike Price

The strike price is the fixed price at which you can buy or sell a stock through an options contract. Think of it as a locked-in price you agree to in advance. You'll hear about strike prices when trading options—contracts that give you the right (but not the obligation) to buy or sell shares at a specific price by a certain date. Strike prices matter because they determine whether an option is actually worth using. If you buy a call option (the right to buy) with a $50 strike price on a stock now trading at $60, that option has value because you could buy at $50 and sell at $60. If the stock drops to $40, that option becomes worthless.