The Exercise Price is the price at which an underlying security can be purchased or sold when trading a call or put option, respectively. The exercise price is also known as the strike price. A call option gives the holder the right to purchase shares of an underlying security at a fixed price, called the exercise or strike price. A put option gives the holder of the option the right to sell shares of an underlying security at a fixed exercise or strike price.When determining whether to buy or sell a call or put option, it's important for investors to consider both extrinsic and intrinsic value.Extrinsic value is what you pay for an options contract and represents time value and risk premium. Intrinsic value reflects only how much money you would make if you exercised your options contract immediately (assuming it was in-the-money).Knowing both intrinsic and extrinsic values are important when making investment decisions because they help investors determine whether they're getting a good deal on their contracts—i.e., whether they're paying too much for time value/risk premium versus how much money they could make if they exercised their options immediately.
