We have changed our privacy policy. In addition, we use cookies on our website for various purposes. By continuing on our website, you consent to our use of cookies. You can learn about our practices by reading our privacy policy.

ShmoopTube

Where Monty Python meets your 10th grade teacher.

Search Thousands of Shmoop Videos


Social Studies Videos 2409 videos

GED Social Studies 1.1 Civics and Government
39794 Views

GED Social Studies 1.1 Civics and Government

Fake News
11939 Views

How do you tell fake news from real news?

Why Does the Constitution Still Work for Us?
5723 Views

Ever heard of a "living document"? They eat and breathe just like the rest of us! They even walk around on their own two legs. Okay, fine—maybe t...

See All

Finance: What is a Strike Price? 40 Views


Share It!


Description:

What is a strike price? Strike prices are used in conjunction with options. Calls and puts give investors the right to buy or sell stocks at predetermined prices called strike prices. If the investor owns a call option, they can buy the stock at the strike price; with a put option, they can sell the stock at the strike price.

Language:
English Language

Transcript

00:03

Finance a la shmoop what is a strike price well before going

00:09

even a second further with this video be sure you've seen our Steven Spielberg [Introduction to a movie at the cinema directed by Steven Spielberg]

00:13

directed what is a stock option video here are the reviews from variety.. well

00:21

to review a stock option is the right to buy a share of stock for a set price

00:27

over a given period of time so let's say you were granted an option to buy a [Graph of amazon stock prices]

00:33

share of Amazon stock in 2015 when the stock was around 400 bucks a share the

00:39

option lasts as long as you work at the company in good standing or after 10

00:43

years have passed which ever ends first well one day you decide you want another job [Woman signing a contract]

00:48

your contract says that if you're no longer an employee with the company then

00:52

you have 90 days in which to either buy out your option that is to buy the

00:57

option and then own the stock or just forfeit the option [Woman underlining words on a contract]

01:01

well since Amazon is now at a thousand bucks a share you obviously don't want

01:05

to forfeit the option to buy that share of stock for 400 bucks but you note that

01:10

your many friends who joined apcray.com at a high price a high strike price which

01:16

creators know they're stock while they're doing a lot of option forfeiting

01:21

that is their options ended up being worthless so you've got a lot to think [Man holding out a bag of dog poo]

01:24

about here this is Amazon not apcray so you want to buy out your option so

01:28

what happens well you were granted your own options at the price Amazon stock [Amazon box falls off shelf]

01:34

was trading at the day you joined the company it was 400 bucks a share so

01:38

that's a strike price that $400 is the price you pay to buy a share of stock at

01:44

some point there in the future that strike price has nothing to do with [Protestors holding signs outside an Amazon building]

01:48

unions not working got it? all right well in order to buy that stock it's

01:53

currently trading in a thousand bucks a share

01:55

you pay Amazon 400 bucks and that buys out your option you then own the stock [Man writing a check to Amazon for 400 dollars]

02:02

that's it Amazon cancel your option then they give

02:05

you a share of actual stock which you now own for as long as you want to own [Man delivering an Amazon box]

02:09

it you can sell it immediately and make a

02:11

$600 a share profit that's a thousand bucks a share it's trading at now minus the

02:16

$400 strike price you just paid to buy out that option got it or you can hold [Grandparent bribing grand-daughter for amazon stock]

02:21

onto those shares and you know use it to bribe your grandchildren one day it's

02:26

worth like a million dollars a share

Related Videos

GED Social Studies 1.1 Civics and Government
39794 Views

GED Social Studies 1.1 Civics and Government

Fake News
11939 Views

How do you tell fake news from real news?

Finance: What is Bankruptcy?
260 Views

What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...

Finance: What is a Dividend?
1777 Views

What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...

Finance: How Are Risks and Rewards Related?
589 Views

How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...