Investor Glossary-exercise priceInvestor Glossary-exercise priceInvestor Glossary-exercise priceInvestor Glossary-exercise priceInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Exercise Price

The HTML to link to this page
 

The exercise price, or strike price, is the price at which the owner can exercise an option. A call entitles the holder to buy the underlying asset at the exercise price, and a put entitles the owner to sell the underlying at the exercise price. If the the market price is significantly above the exercise price, the option can be exercised at a profit. If the the market price is significantly below the exercise price the investor must consider the impact of transaction costs in determining whether it is worthwhile to exercise the option. The exchange decides the exercise price increment for a given option series based on the price of the asset as well as the actual choices of exercise price available for that asset. For example, on a stock trading at $52.50, the exchange may initiate a new option series at one exercise price above and one below, say $50 and $55. If the stock price passes $55, options at the $60 exercise price will be offered.



Rate this exercise price definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: cancelled check, stock split, ex-dividend, class C shares, balance sheet, dividends payable, deferred tax, 401a, average price per share, stock market close, VIX, current ratio, open position, EBITDA, debt service coverage, irrevocable trust, risk management, required rate of return, retained earnings, inflation, covered put, FICO score, diluted share, APR, quality assurance, 144a, in escrow, wholly-owned subsidiary, ex-dividend date, reverse mortgage, labor relations, 1035 exchange, deferred revenue, Key Rate Duration, Zero Cost Collar, 1031 exchange, option premium, phantom income, LIBOR, command economy, limit order, FTSE, minority interest, margin rate, annual return, implied volatility, real GDP, liquidity ratio, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use