Exercise Price

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Definition: Exercise Price

An option gives a right but no obligation to the buyerto enter into a transaction involving an underlying assetat a predetermined price. This predetermined price is called as the exercise price or the strike price. The option is always exercised or executed at the exercise price regardless of what the market price/spot price is.

For example, the option holder may have the right to buy 100USD at Rs. 45 per USD. If the option holder exercises the option, he will buy the 100USD at Rs. 45 per USD regardless of what is the current conversation rate between Rupees and USD.

 



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