Definition: The price at which the underlying futures contract can be bought (if a call option) or sold (if a put option) if the buyer of an option chooses to exercise the option.
Each option has a designated strike price - usually in standard intervals. The strike price also helps determine the value of an option. Options in the same delivery month will have a higher premium if they are in the money than out of the money.
Examples:
If the buyer of a gold call option with a strike price of $600 chooses to exercise the option, he will then enter into a long position in a gold futures contract at a price of $600.
Therefore, if gold futures are trading at $625 at the time of the exercise, the buyer will have a profit of $25 minus the premium originally paid for the option.
