The strike price is the predetermined price at which the holder of an option can buy or sell the underlying asset if they choose to exercise the option.
For a Call Option:
The strike price is the price at which the call option buyer has the right to purchase the underlying asset on the expiry date.
For example, buying a Reliance ₹2000 call option expiring on November 30, 2024, gives the buyer the right to purchase Reliance shares at ₹2000, regardless of the market price on November 30, 2024.
For a Put Option:
The strike price is the price at which the put option buyer has the right to sell the underlying asset on the expiry date.
For example, buying a Reliance ₹1800 put option expiring on November 30, 2024, gives the buyer the right to sell Reliance shares at ₹1800, regardless of the market price on November 30, 2024.
Key Takeaways:
Understanding the strike price is essential for making informed decisions in options trading. It’s more than just a number—it’s the key to making smart decisions and managing risks effectively in the ever-changing stock market.
Disclaimer:This information is for educational purposes only. Trading in Futures and Options involves substantial risk and is unsuitable for all investors. Past performance is not indicative of future results. Consult a financial advisor before engaging in such trading activities.
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