11.16What is a strike price?

1What is it?

The fixed price at which the option holder can buy (call) or sell (put).

2Why does it exist?

Many strikes are available (e.g. every 50 points for Nifty); choosing one sets the risk/reward of the trade.

3Diagram

9:41Option chain●●●

NIFTY · Spot 25,000 · illustrative

Call OICall LTPStrikePut LTPPut OI

1.2L41024,600450.8L

2.5L27024,800951.9L

4.1L16025,0001803.6L

3.0L8525,2003051.4L

2.2L4025,4004600.6L

Illustrative screen · prices are made up

Illustrative option chain: strikes in the middle, calls on the left, puts on the right.

4Quick revision

5Knowledge check

Q1. What does strike mean for a call?Show answer

The price at which you can buy.

Q2. For a put?Show answer

The price at which you can sell.

Q3. Where do you see all strikes?Show answer

In the option chain.

More in Level 11: Advanced Trading: Futures and Options (F&O)