Strike Price
In simple terms
The strike price is the set price at which you can buy or sell an asset when using an option contract. Think of it like a coupon that lets you purchase something at a locked-in price, even if the market price changes.
Definition
The agreed price at which an option can be exercised.
In depth
The strike price is the predetermined price level at which an option contract grants the holder the right to buy (call option) or sell (put option) the underlying asset at expiration or before. In crypto derivatives markets, strike prices are established when the option is created and remain fixed regardless of the spot price movements of the underlying asset. The difference between the strike price and the current market price (intrinsic value) determines whether an option is in-the-money, at-the-money, or out-of-the-money, which directly affects its premium valuation and exercise profitability.
How does Strike Price work?
The strike is fixed when a contract is listed and never changes for the life of that contract. Exchanges publish a ladder of strikes at set intervals above and below the current market price, and each one is a separate tradeable contract. At expiry the exchange compares the settlement price of the underlying with the strike: a call pays settlement minus strike, a put pays strike minus settlement, and neither can pay less than zero. Strikes far from the market price carry smaller premiums because the chance of any payout is lower.
An example
An exchange lists calls on the same expiry at $1,800, $2,000 and $2,200 strikes (illustrative figures). A buyer pays $90 for the $2,000 strike; the $2,200 strike costs $30 because it sits further away. If the settlement price is $2,150, the $2,000 strike pays $150, netting $60, while the $2,200 strike pays nothing and loses its $30. Same asset, same date, different strikes, different outcomes.
Figures are illustrative only.
What beginners get wrong
- A strike is not a forecast or a target; it is simply the reference price used to calculate the settlement payout.
- The cheaper premium on a distant strike reflects a lower probability of paying out, not better value for money.
- Comparing premiums across different strikes as though they were the same product is misleading; each strike is its own contract.
- Some expect the strike to adjust as the market moves, but it stays fixed while the underlying price and the premium change around it.
Related terms
Part of
How do crypto options and derivatives work? — the subject page for options and derivatives, with all 9 of its definitions in one place.
Educational only — not financial advice.