What is the difference between the strike price and the market price of an underlying asset? Back to list

Member SinceJul 08, 2021

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Wilburn

Mar 14, 2023 a 02:39
The strike price and the market price of an underlying asset are two key concepts in options trading. The strike price is the price at which the buyer of an options contract has the right to buy or sell the underlying asset, while the market price is the current price of that asset in the market.

The difference between the strike price and the market price can have a significant impact on the value of an options contract. In general, options with strike prices that are closer to the market price of the underlying asset are more expensive, as they have a higher likelihood of being exercised.

Traders use the difference between the strike price and the market price to make decisions about buying and selling options. For example, if the market price is significantly higher than the strike price for a call option, it may be more profitable to sell the option rather than exercise it. Similarly, if the market price is significantly lower than the strike price for a put option, it may be more profitable to exercise the option and sell the underlying asset.

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