Definition
The strike price is the predetermined price at which an options contract allows the holder to buy or sell an underlying asset. It is set when the options contract is created and does not change over the life of the contract. The relationship between the strike price and the current price in the spot market helps determine whether an option is considered valuable or not. In crypto trading, the strike price is a key reference point for understanding how an options position might behave as market prices move.
For a call option, the strike price is the price at which the holder has the right to buy the underlying asset. For a put option, it is the price at which the holder has the right to sell the underlying asset. The distance between the strike price and the current market price influences the options premium that traders pay or receive. Together with the contract’s expiration date, the strike price shapes the basic risk profile of an options position.
In Simple Terms
The strike price is the deal price written into an options contract. It tells the holder exactly what price they can use if they choose to exercise the option. When the spot market price moves above or below this level, it affects whether a call option or put option is likely to be profitable. Because of this, traders look closely at the strike price when judging the cost of the options premium and the overall risk profile of a trade.