Strike Price Example: Understanding with Real Stock Data
Introduction
The best way to understand strike prices is by looking at real stock data. In this guide, we’ll walk through practical examples using actual stock prices and options chains. By the end, you’ll know how to analyze a strike price and apply it to your own trades.
Why Real Examples Matter
Theory is important, but real-world examples help you visualize how strike prices influence premium, profitability, and decision-making in options trading.
Example 1: Call Option on Microsoft (MSFT)
Stock Data:
- Current price: $420
- Expiration date: 1 week from today
| Strike Price | Option Type | Premium | Moneyness |
|---|---|---|---|
| $400 | Call | $25.00 | In-the-Money |
| $420 | Call | $12.50 | At-the-Money |
| $440 | Call | $3.00 | Out-of-the-Money |
Analysis:
- The $400 strike call is already profitable ($20 ITM)
- The $420 strike needs a slight move to become profitable
- The $440 strike is cheaper, but needs a big move to $443 to break even
Example 2: Put Option on Tesla (TSLA)
Stock Data:
- Current price: $180
- Expiration: 10 days out
| Strike Price | Option Type | Premium | Moneyness |
|---|---|---|---|
| $200 | Put | $22.00 | In-the-Money |
| $180 | Put | $10.00 | At-the-Money |
| $160 | Put | $3.00 | Out-of-the-Money |
Analysis:
- The $200 put is $20 in-the-money, offering high protection
- The $180 strike is break-even at expiry
- The $160 strike is speculative and cheaper, with low chance of success
How to Read the Option Chain for Strike Prices
Every trading platform (e.g., ThinkorSwim, Webull, Robinhood) shows an options chain. Here’s how to read it:
- Strike prices are listed in the middle
- Calls on the left, puts on the right
- Premiums are listed for each
- Use filters for date, volume, and open interest
Takeaways from These Strike Price Examples
- In-the-money options have higher premiums but are safer
- Out-of-the-money options are cheaper but need a strong price move
- At-the-money strikes balance cost and probability
- Always factor in break-even price and time left to expiry
Conclusion
Real-world strike price examples make it easier to connect theory with practice. By studying options chains and live data, you’ll become better at selecting the right strike for your goals and risk level.
FAQs
Q1. What’s the easiest way to understand strike prices?
Study examples with live stock data and watch how strike prices affect premium and risk.
Q2. Are strike prices the same on every platform?
Yes, strike prices are standardized across all platforms by the exchange.
Q3. What if my option never reaches the strike price?
It expires worthless if it’s out-of-the-money at expiration.
Q4. How do I practice strike price selection without losing money?
Use a paper trading account to simulate trades in real-time.
Q5. Where can I find real-time options chains?
Broker platforms like TD Ameritrade, TradingView, and Webull offer real-time data.
