Strike Price

The strike price is the exchange rate written into an option contract — the rate at which the holder may buy or sell the pair if the option is exercised. It is fixed when the contract is agreed and does not move with the market. Everything else about the option's value follows from where the market rate sits relative to it, which is why the strike is the first thing quoted about any option. Strikes are not scattered at random. In a dealer-quoted market they cluster at round numbers and at the levels used in standard quoting conventions, which is one reason those levels get discussed as though they mattered on a chart. What a strike is not is a forecast. An option struck at a rate says only that two parties agreed a price for the right to trade there, and the amount of option business sitting at a level says nothing dependable about which way the market will go. For a listed contract the available strikes are published by the exchange in its contract specification; for an over-the-counter contract the strike is whatever the two parties agree it is.