Options Strike Price Explained

The strike price is the price at which you can buy (call) or sell (put) the underlying stock if the option is exercised.

Strike Price Terminology

In the Money (ITM)

  • Call: Strike below stock price
  • Put: Strike above stock price
  • Has intrinsic value

    • At the Money (ATM)

  • Strike approximately equals stock price
  • Highest time value

    • Out of the Money (OTM)

  • Call: Strike above stock price
  • Put: Strike below stock price
  • No intrinsic value, all time value

    • Choosing Strike for Covered Calls

    | Goal | Delta | Strike vs Stock | Keep shares0.15-0.208-12% above Balance0.25-0.305-7% above Max income0.35-0.452-4% above

    Choosing Strike for Cash Secured Puts

    GoalDeltaStrike vs Stock Low risk0.15-0.208-12% below Balance0.25-0.305-7% below High income0.35-0.452-4% below