By Bayo
We are hoping this to be an easy and simple lesson to introduce options to you. By following Options Basics' articles, you should be able to understand options and how to utilize options to either profit or protect your stock.
Strike Price
The strike price, also called exercise price, is the pre-agreed price that the option holder owns the right to buy or to sell the underlying stock.
Strike prices are generally listed in $1, $2.50, $5, or $10 increments, depending on the
value of the strikes and the liquidity of the options.
When considering which strike price to pick, you should pay attention to the relationship between the strike price and stock price.
In-The-Money (ITM)
For calls, this means the stock price is above the strike price.
For puts, it means the stock price is below the strike price.
At-The-Money (ATM)
It means the stock price is equal or very close to the strike price.
Out-of-The-Money (OTM)
For calls, it means the stock price is below the strike price.
For puts, this means the stock price is above the strike price.
Please stay with us for more on options basics!
If there is anything that you didn't understand in today's Options Basics article, simply leave a comment below and we will try to explain more to you!