The strike price is the number written into your option contract: the price at which you have the right to buy the stock (a call) or sell it (a put). You choose it when you open the trade, and it never moves again, no matter what the stock does.
The stock price wanders every second. The strike stands still. Everything about your option is measured against that line: whether it is in or out of the money, what the premium costs, and where your breakeven sits. Picking a strike is the closest thing options have to placing your bet on the table.
The numbers
A stock trades at $100. Three calls, same stock, same 30 days on the clock. The only difference is the strike, and look what it does to the price and to what has to happen before you earn a cent.
| Strike | Premium (per contract) | Breakeven at expiry | Move needed |
|---|---|---|---|
| $95 | $7.10 ($710) | $102.10 | +2.1% |
| $105 | $3.00 ($300) | $108.00 | +8% |
| $115 | $0.85 ($85) | $115.85 | +15.9% |
The strike is not just a price tag. It is the odds you are accepting. The $115 call costs pocket change because it needs a 16% move in a month, and the market does not hand those out often.
Where it bites
Chasing the cheap strike. Far-out strikes look like bargains. They are priced like lottery tickets for a reason: most expire worth exactly nothing. Buying ten cheap calls instead of one sensible one is not diversification, it is ten copies of the same long shot.
Strike is not breakeven. Crossing the strike does not mean profit. You paid a premium to sit at that table, so the stock must clear the strike plus what you paid. On the $105 call above, $107 at expiry is still a losing trade.
Close counts for nothing. At expiry your option is measured against the strike and nothing else. A $105 call with the stock at $104.99 expires worthless. There is no "almost" in the contract.
Go feel it
The strike is where cost and odds trade against each other, and a table only tells you half of it. Pick strikes yourself and watch the same $300 behave completely differently in Lesson 3: The Strike.
Related concepts: option premium · ITM, OTM, ATM · theta decay