0 Strike Price



 
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 selecting options to buy or sell, for options expiring on the same month, the option's price (aka premium) and moneyness depends on the option's strike price.

Relationship between Strike Price & Call Option Price

For call options, the higher the strike price, the cheaper the option. The following table lists option premiums typical for near term call options at various strike prices when the underlying stock is trading at Rs50

Strike Price
Moneyness
Call Option Premium
Intrinsic Value
Time Value
35
ITM
Rs15.50
Rs15
Rs0.50
40
ITM
Rs11.25
Rs10
Rs1.25
45
ITM
Rs7
Rs5
Rs2
50
ATM
Rs4.50
Rs0
Rs4.50
55
OTM
Rs2.50
Rs0
Rs2.50
60
OTM
Rs1.50
Rs0
Rs1.50
65
OTM
Rs0.75
Rs0
Rs0.75

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 premiums typical for near term put options at various strike prices when the underlying stock is trading at Rs50

Strike Price
Moneyness
Put Option Premium
Intrinsic Value
Time Value
35
OTM
Rs0.75
Rs0
Rs0.75
40
OTM
Rs1.50
Rs0
Rs1.50
45
OTM
Rs2.50
Rs0
Rs2.50
50
ATM
Rs4.50
Rs0
Rs4.50
55
ITM
Rs7
Rs5
Rs2
60
ITM
Rs11.25
Rs10
Rs1.25
65
ITM
Rs15.50
Rs15
Rs0.50



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