The fixed price at which an options contract holder can buy (call) or sell (put) the underlying asset upon exercise.
The strike price is the predetermined price at which the holder of an options contract has the right to buy (for a Call Option) or sell (for a Put Option) the underlying asset. It is the single most important parameter in determining an option's value and risk profile, fixed at the time the contract is created and unchanged until expiry.
Options are classified by their relationship to the current market price. An "in-the-money" (ITM) call has a strike price below the current price; an "out-of-the-money" (OTM) call has a strike above. For puts, the relationship is reversed. "At-the-money" (ATM) options have strikes closest to the current price. This classification determines the option's intrinsic value and time value composition.
On NSE, strike prices are available at fixed intervals: Nifty options have strikes at every 50-point interval (e.g., 22000, 22050, 22100), Bank Nifty at every 100 points, and stock options at intervals determined by the stock's price level. The exchange adds new strikes as the underlying price moves, ensuring there are always sufficient OTM and ITM strikes available for trading.
Strike selection is a critical trading decision. Deep OTM options are cheap but carry a low probability of profit - the underlying must move significantly for the option to gain value. ATM options sit at the centre of the cost-versus-probability trade-off. ITM options track the underlying more closely but cost more in Premium. Professional options traders select strikes based on the view on direction, volatility, and time horizon.
Strike prices anchor every option strategy: straddles (buying both a call and put at the same strike), strangles (buying a call and put at different OTM strikes), and spreads (buying and selling options at different strikes) each have a distinct risk-reward profile defined by the chosen strike prices and their distance from the current market price.
India Context
NSE strike intervals: Nifty at 50 points, Bank Nifty at 100 points. Stock option strikes set by exchange based on price level. New strikes added dynamically as underlying moves.