Base on this example, GOOG 510 Call, the strike price of 510 means the stock can be bought for $510 per share and vice versa for put option, allows the buyer to sell the stock at $510. Strike prices is mostly used to describe stock and index options, in which strike prices are fixed in the contract.
This is true for options that are in the money; the maximum amount that can be lost is the premium paid.


The strike price also helps us to identify whether an option is In the Money(ITM), At the Money(ATM) or Out of the Money(OTM) when compared to the price of the underlying security. For call options, the strike price is where the security can be bought (up to the expiration date), while for put options the strike price is the price at which shares can be sold.





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Comments

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    02.05.2013

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    02.05.2013