Get Started

Strike and expiration: the two choices

60-second readBeginnerInteractive

1In one sentence

Every option has a strike (the price it locks in) and an expiration (how long it lasts). Those two choices set what it costs and what the stock has to do.

A strike close to today's price costs more but needs a smaller move. More time costs more, but gives the stock longer to get there.

2Try it: pick a strike and a date

Example: NVDA is $215 today. Pick a call strike and how long it lasts, then drag the dot.

Strike
Time to expiration

← drag the dot →
MOST YOU LOSE
BREAK-EVEN
MOST YOU MAKE

33 words to know

In the moneyITM

A call whose strike is below today's price (or a put whose strike is above it). It already has value.

Out of the moneyOTM

A call whose strike is above today's price. It's cheaper because it has no value yet, only hope.

Time valuedecays

The part of the price paid for time left. It shrinks every day and is zero on expiration day.

4Watch out

  • Cheap isn't the same as good. Far out-of-the-money options are cheap because they usually expire worthless.
  • Short dates decay fastest. Options lose time value faster in their last weeks, so short expirations need the move quickly.
  • Earnings change prices. Options often cost more before earnings and drop in value right after, even if the stock moves.

5Quick check · 3 questions · optional

1. NVDA is $215. Which call is in the money?
2. Why does a 90-day option cost more than a 7-day one at the same strike?
3. What happens to an option's time value on expiration day?

Common questions

What is a strike price in options?

The strike is the price the option lets you buy (call) or sell (put) the shares at. Strikes near today's price cost more; strikes far away cost less but need a bigger move.

What does in the money mean?

A call is in the money when its strike is below the stock price; a put is in the money when its strike is above it. In-the-money options already have some value.

How do I choose an expiration date?

Longer expirations cost more but give the stock more time to move and lose value more slowly. Short expirations are cheap but need the move to happen fast.

NEXT · LESSON 4How Should I Enter works
→

Education only. Examples use illustrative numbers. Not financial advice; you make your own decisions.