What is the strike price?

Each option contract will have a specific expiration date by which the holder must exercise their option. The stated price on an option is known as the strike price.

If you bought a call option, your call will be profitable if the market price of the stock goes above the strike price, since you can buy the stock at a price that is lower than the current market price. However, if the value of the stock stays below your strike price, your options contract will expire worthless.

Please note: You are not actually buying shares of the stock unless you exercise your contract. You are buying a contract that grants you rights to purchase stocks at a specific price on or before a certain date.