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Option terms Strike Price, Expiration Date, Premium?

Strike Price

The strike price is the price at which the underlying asset may be bought or sold if the option is exercised.

Strike prices are fixed at the time the option contract is created and remain unchanged throughout the life of the option.

 

Expiration Date

The expiration date is the date on which an option contract ceases to exist.

After expiration:

  • Unexercised options become worthless
  • Rights and obligations under the contract terminate

Premium

The premium is the price paid by the option buyer to the seller for the rights conveyed by the option.

For option buyers:

  • The premium represents the maximum potential loss
  • The premium represents the maximum potential gain, excluding commissions and fees

    For option sellers:

    • The premium represents the maximum potential gain, excluding commissions and fees

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