The AI (ChatGPT) Stock Investing Handbook: Options - Strike Price

Here is the response from ChatGPT for the prompt option strike price entered on February 15, 2023

The strike price of an option is the fixed price at which the underlying asset can be bought or sold when the option is exercised. For a call option, the strike price is the price at which the underlying asset can be purchased, while for a put option, the strike price is the price at which the underlying asset can be sold.

The strike price is agreed upon at the time the option is bought or sold and is set by the option contract. The option contract also specifies the expiration date of the option, which is the last day the option can be exercised.

The strike price is a crucial factor in the pricing and valuation of options, as it determines the potential profit or loss for the option holder. The higher the strike price, the lower the potential profit for a call option holder and the higher the potential profit for a put option holder. The lower the strike price, the higher the potential profit for a call option holder and the lower the potential profit for a put option holder.

In summary, the strike price is the fixed price at which the underlying asset can be bought or sold when an option is exercised. It is a key consideration in the pricing and valuation of options and can significantly impact the potential profit or loss for the option holder.

Options - Puts and Calls