Which best describes the strike price on an option contract?
A)The strike price is the price that must be paid for a common share when it is bought by exercising a conversion warrant.
B)The strike price is the price that must be paid for an option contract when it is bought or sold.
C)The strike price is the price that must be paid for a common share when it is bought by exercising a right.
D)The strike price is the price that must be paid for a common share when it is bought by exercising the option.

Question

Quizplus · Accepted Answer

The strike price is the price at which the holder of an options contract can buy or sell the underlying asset, in this case a common share. When an option is exercised, the holder must pay the strike price in exchange for the shares. Option contracts give the holder the right, but not the obligation, to exercise the option at the strike price.

Which Best Describes the Strike Price on an Option Contract