Strike Price

The strike price is the fixed price written into an options contract — what the underlying stock can be bought at (for a call) or sold at (for a put). It's set when the contract is created and never changes, unlike the premium, which is the market price of the option and fluctuates constantly. For a call, the stock trading above the strike is what gives the option real value; for a put, it's the reverse. Every options trade comes down to three numbers: the strike price and expiration date, fixed at creation, and the premium, which keeps changing as long as the option trades. Choosing a strike really means choosing the terms of a potential future trade — the exact price you'd buy or sell the stock at if the option gets exercised or assigned.