Strike Price
The strike price — also called the exercise price — is the predetermined price at which the holder of an option can buy (for a call) or sell (for a put) the underlying asset. It is one of the four core elements of every options contract, alongside the underlying, expiry and premium. Choosing the right strike is one of the most important decisions an options trader makes in Indian markets.
Key takeaways:
- Strike is the fixed transaction price defined by the option contract.
- Strikes are set by the exchange in standard intervals (e.g., every 50 points on Nifty).
- Distance from spot determines whether the option is ITM, ATM or OTM.
- Strike selection affects premium, probability of profit and leverage.
- In Indian markets, strikes for Nifty extend in 50-point steps and Bank Nifty in 100-point steps.
Strike intervals and availability
| Underlying | Strike Interval |
|---|---|
| Nifty 50 | 50 points |
| Bank Nifty | 100 points |
| FinNifty | 50 points |
| Stock options | 2.5%–5% of spot, by tier |
How strikes interact with spot price
- ATM (At The Money): Strike closest to current spot — highest premium time value.
- ITM (In The Money): Strikes that already have intrinsic value (call strike below spot, put strike above spot).
- OTM (Out of The Money): Strikes without intrinsic value — pure time value.
- Deep ITM/OTM: Strikes far from spot — used in special strategies.
Strike selection — trade-offs
Different strikes serve different goals:
- ATM: Balanced delta and theta; common for directional bets and straddles.
- OTM: Cheaper, lower probability of profit, higher leverage if it hits.
- ITM: Higher premium, lower leverage, behaves more like a futures position.
Examples
Spot Nifty 22,000. The 22,000 call is ATM. The 22,100 call is slightly OTM; the 21,900 call is slightly ITM. ITM premiums include intrinsic value (spot − strike, here ₹100 for the 21,900 call). OTM call premiums are entirely time value.
Strike selection in different scenarios
| Scenario | Preferred strike |
|---|---|
| Strong directional view, short expiry | ATM or slightly ITM |
| Cheap leverage on uncertain news | OTM |
| Pure delta exposure | Deep ITM (acts like futures) |
| Selling premium for income | OTM (collect time value) |
Common mistakes
- Buying very far OTM strikes simply because they are cheap.
- Ignoring strike distance vs daily expected move (use ATR or implied volatility).
- Failing to compare strikes across expiries for the best risk-reward.
- Selling deep ITM strikes without accounting for assignment risk.
Frequently asked questions
Can the exchange add new strikes intraday?
Yes — if a large move requires more strikes for liquidity, the exchange adds them automatically.
Which strike has the highest premium?
Deep ITM strikes have the highest absolute premium because of intrinsic value; ATM has the highest time value.
Does strike interval change for stocks?
Yes — strike intervals are tiered by stock price. Higher-priced stocks have wider intervals.
What is the difference between strike and exercise price?
They are synonymous in the Indian context.
