What Is an Option Premium and Strike Price?
Every option is defined by two numbers: the strike price and the premium. Get these two straight and options stop feeling mysterious.
Strike price
The strike price is the fixed price written into the contract — the price at which you can buy (for a call) or sell (for a put) the underlying, no matter where the market actually goes. If you hold a call with a ₹100 strike and the stock is ₹130, your right to buy at ₹100 is clearly valuable.
Premium
The premium is what you pay to own the option — the cost of the right itself. It's set by the market and depends on how far the strike is from the current price, how much time is left, and how volatile the stock is. A buyer's maximum loss is the premium paid.
In, at, or out of the money
- In the money — exercising would make a profit (e.g. a ₹100 call when the stock is ₹130).
- At the money — the strike equals the current price.
- Out of the money — exercising makes no sense yet (a ₹100 call when the stock is ₹80).
The further in the money and the more time left, the higher the premium. These are derivative mechanics; our data covers the underlying stock prices.