🎯 What is Strike Price? (Simple Definition)
Strike price (also called exercise price) is the fixed price at which you can buy (Call) or sell (Put) the underlying stock or index when you exercise your option.
Think of strike price like a fixed menu price at a restaurant. No matter how much the market price changes, you can buy/sell at the strike price you chose.
Example: If you buy Nifty 22,000 Call option, ₹22,000 is your strike price. You can buy Nifty at ₹22,000 regardless of current market price.
📊 ITM, OTM, ATM Explained (Strike Price Types)
✅ ITM (In-the-Money)
Call: Strike < Current Price
Put: Strike > Current Price
Has intrinsic value. Higher premium, better probability.
⚖️ ATM (At-the-Money)
Call & Put: Strike ≈ Current Price
Most liquid. Balanced premium. Best for beginners.
❌ OTM (Out-of-the-Money)
Call: Strike > Current Price
Put: Strike < Current Price
Cheaper premium. Lower probability. Needs bigger move.
Real Example: Nifty at ₹22,000
- • ITM Call: Nifty 21,800 Call (strike below current)
- • ATM Call: Nifty 22,000 Call (strike = current)
- • OTM Call: Nifty 22,200 Call (strike above current)
🎯 How to Choose the Best Strike Price
✅ For Beginners: Start with ATM
ATM (At-the-Money) options offer the best balance of premium cost and profit probability. Perfect for learning.
📈 For Aggressive Traders: OTM
OTM options are cheaper but need bigger price moves. Higher risk, higher reward potential.
🛡️ For Conservative Traders: ITM
ITM options have higher probability of profit but cost more. Lower risk, steady returns.
💡 Real Examples: Strike Price Selection
Scenario: Nifty at ₹22,000, You Expect Rise to ₹22,500
Premium: ₹150, Break-even: ₹22,150, Profit if Nifty hits ₹22,500: ₹17,500
Premium: ₹80, Break-even: ₹22,180, Profit if Nifty hits ₹22,500: ₹16,000
Premium: ₹220, Break-even: ₹22,120, Profit if Nifty hits ₹22,500: ₹19,000
⚠️ Common Strike Price Mistakes
1. Always Buying OTM (Too Far)
Buying strikes too far OTM has very low probability. Price needs huge move to profit.
2. Ignoring Break-Even
Always calculate break-even. Don't buy if you don't expect price to cross break-even.
3. Not Considering Premium Cost
Higher strike doesn't always mean better. Compare premium vs profit potential.
❓ Frequently Asked Questions
What is the best strike price for beginners?
Start with ATM (At-the-Money) strike price. It offers the best balance of cost and probability. Once comfortable, experiment with ITM and OTM.
How do I know if strike price is ITM or OTM?
For Call: Strike < Current Price = ITM, Strike = Current = ATM, Strike > Current = OTM. For Put: Reverse the logic.
Can I change strike price after buying option?
No, strike price is fixed when you buy. You can sell the option and buy a different strike, but that's a new trade.
What strike price has highest profit?
OTM strikes have highest profit percentage if they hit, but lowest probability. ITM strikes have higher probability but lower profit percentage.
Practice Strike Price Selection Risk-Free
Test different strike prices on Zerroday with real Nifty data. Learn which strikes work best for your trading style with AI feedback.
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