Exercise price

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Exercise price (also known as strike price) is the specified price on an option contract at which the contract may be exercised. In other words, a call option buyer can buy the underlier or a put option buyer can sell the underlier.

The buyer's profit from exercising the option is the amount by which the spot price exceeds the exercise price in the case of a call, or the amount by which the exercise price exceeds the spot price in the case of a put. Generally, the smaller the difference between spot and exercise price, the higher the option premium.