Personal Finance & Money Asked on April 5, 2021
I am reading a document that says The seller of 10 call options, with a strike price of 400 at CHF 8.00, (contract value 10), has the following risk
What does 400 at CHF 8 mean? i.e. I understand what 8 Swiss Francs mean but what is this 400 doing?
400 is the strike price for the call option, that is, the amount the person who exercises the option has to pay for each share of stock they call.
Answered by David Schwartz on April 5, 2021
The strike price is the price at which a derivative contract can be bought or sold when it is exercised.
For call options, the strike price is what the owner pays for the security if he exercises his call. The counterparty who is short the call and is assigned receives that amount.
For put options, the strike price is the price at which the owner sells the security for if he exercises his put. The counterparty who is short the put and is assigned pays that amount.
Strike price is also known as the exercise price.
Answered by Bob Baerker on April 5, 2021
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