Strike Price

A strike price is the fixed price at which the owner of an option can purchase, in the case of a call, or sell, in the case of a put, the underlying commodity. The strike price is often called the exercise price. The strike price is a standardized feature of the contract and is set by the exchange.

Examples

A May Corn Call Option with a strike price of $4 per bushel might cost $0.25 per bushel to buy. When the option is exercised the owner of the option will have a long May corn futures position at $4 per bushel.

Similarly a May Corn Put Option with a strike price of $3.50 per bushel might cost $0.18 per bushel to buy. If and when the option is exercised the owner of the put option will have a short May corn futures position at $3.50 per bushel.

Terminology

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