Options Strike Price
Price of an option, otherwise known as options strike price,is structured in a way it's above, below or the same as the underlying stocks and increment in steps known as strike depending on the stock current price range.
When the Strike price
- is same as the stock price, it's known as At The Money (ATM)
- is below the stock price, it's known as In The Money (ITM)
- is above the stock price, it's known as Out Of Money (OOM)
Option Strike Prices range
For stock Price range from $5 to $25 , strike price increase by $ 2.5 interval, ie
- 5,7.5, 10, 12.5,15....22.5, & $ 25
For stock price range, $ 25- $ 200, strike price increase by $ 5 interval
- 30, 35,40,45,50....195 & $ 200
For stock price $ 200 and above, strike price increase by $ 10 interval
Which strike price to Choose?
When you buy or sell the option contract, you have to decide which strike price to choose. To play safe, I would either use the ATM or ITM.
Say you are buying a CALL and the stock price is $45 and you believe it will go up in the near future, you can buy the ATM @ $ 45 or the ITM @ $ 40. If you buy the OOM call @ $ 50 and you are wrong, you could potentially lose all the money on this trade without hedging it against a put options.
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