What is Strike Price in Option Trading? Explained with Simple Examples

Understanding strike price is one of the first steps in learning options trading. It helps you choose the right entry point and analyze the risk-reward.


Let’s break it down in simple terms with examples.


🔹 What is Strike Price?

A strike price is the price at which you agree to buy or sell the underlying asset when you trade an option.


In simple words:


For Call Options: Strike price is the price you can buy the asset


For Put Options: Strike price is the price you can sell the asset


🔍 Example 1: Nifty Call Option

Let’s say:


Nifty is currently at 22,700


You buy a Call Option with strike price 22,800


That means: you’re betting Nifty will go above 22,800


If Nifty moves to 23,000 → you profit

If Nifty stays below 22,800 → you lose the premium


🔍 Example 2: Bank Nifty Put Option

Let’s say:


Bank Nifty is at 48,500


You buy a Put Option with strike price 48,000


You profit if Bank Nifty goes below 48,000


📈 Strike Price vs Market Price

Situation Strike Price Spot Price Result

ITM (In the Money) < Spot (Call) / > Spot (Put) Profitable 

ATM (At the Money) = Spot Price Neutral 

OTM (Out of the Money) > Spot (Call) / < Spot (Put) Not yet profitable 


📌 How to Choose Strike Price?

For Intraday: Choose ATM or 1–2 steps ITM


For Short-Term View: Choose strike based on support/resistance


For Selling Options: Pick OTM with high open interest


❗ Pro Tips:

Higher strike price → lower premium


Avoid very far OTM strikes — they often expire worthless


Combine strike price + option chain + charts for strong entries


📌 Conclusion:

Strike price is a key concept in option trading. Choose wisely based on your target, market trend, and capital.


👉 Stay tuned to Finfo Traders for more trading education and tools.



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