As shown in the table above, all the deep in the money strikes are expensive and have a higher intrinsic value. “at-the Money” or ATM strikes and “out-of-the-Money” or OTM strikes will have no intrinsic valueĪs indicated in the table above, the corresponding price ( LTP) to the call and put option indicates the moneyness of the strikes.įor call options, if the price of the underlying is above the strike price (Nifty50 Spot > Nifty50 Strike), then it is considered an “in the money” option. “in-the-Money” or ITM option strike prices will always have positive intrinsic value. The strike price is a threshold to determine the intrinsic value of options. The 16,100 strike price will be referred to as "out of the Money" (OTM), and the 16,300 strike price will be known as "in the Money" (ITM). Similarly, for the put options, if the Nifty50 is trading at 16,200- the 16,200 strike price will be termed "at the Money" (ATM). And the 16,100 call option strike will be known as the "in the money" (ITM) option. Similarly, the 16,300 call option strike will be referred to as an "out of the money" (OTM) option. In this scenario, the Nifty50's 16,200 call option strike will be termed an " at the money" (ATM) option. Let's assume that the Nifty50 spot is trading at 16,200. Let’s understand the strike price with the help of an example Usually, traders use the term 'exercise price' while exercising the option closer to the expiry of the contract. In the derivatives market, both strike price and exercise price hold the same meaning. Difference between the exercise price and strike price The stock exchange may also consider the total contract value as one of the eligibility criteria. For a security to be included in options trading, there are set criteria of exchange, some of which include volatility, risk tolerance and standard deviation of daily price change. As we know, securities that have a higher open float, and are widely traded, are included in derivatives trading. The strike prices in the share market are computed and declared by the exchange for every security or underlying listed for derivatives trading. *By signing up you agree to our Terms and Conditions How to calculate the strike price?
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