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Simple English definitions for legal terms
striking price
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A quick definition of striking price:
Striking price refers to the price at which an option can be exercised. It is also known as the strike price. When an investor buys an option, they have the right to buy or sell an underlying asset at the striking price. The striking price is predetermined and agreed upon by the buyer and seller of the option. It is an important factor in determining the value of an option and can affect the potential profit or loss for the investor.
A more thorough explanation:
Definition: The striking price is the price at which an option can be exercised. It is also known as the strike price.
Example: Let's say you buy a call option for a stock with a striking price of $50. This means that you have the right to buy the stock at $50 per share, regardless of its current market price. If the stock price rises above $50, you can exercise your option and buy the stock at the lower striking price.
Explanation: The example illustrates how the striking price works in options trading. The striking price is the predetermined price at which the option can be exercised, and it is set at the time the option is purchased. If the market price of the underlying asset (in this case, the stock) rises above the striking price, the option holder can exercise the option and buy the asset at the lower striking price, which can result in a profit.