Stock Market Glossary
Strike price
Agreed price at which an option is exercised or a derivative is settled.
In brief: Agreed price at which an option is exercised or a derivative is settled.
Meaning in practice
The strike price sets the level at which an economic value can arise for options and many warrants. It must be read with ratio, maturity and product type. A low derivative price does not automatically mean low risk, because a distant strike can make expiry without value more likely.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
