What are calls, puts and strikes

Warrants - basic knowledge

26 What is a strike?

The amount of the strike price, subscription price or exercise price - also known as the strike price in expert language - is the price fixed from the start at which the buyer of a warrant can buy or sell the underlying asset The distance between the current price of the underlying asset on the exchange and the strike price is important.

If the strike price is identical to the current price of the underlying asset, it is referred to as an at-the-money warrant. If the base price of a buy warrant (call) is above the current price of its base value, the warrant is classified as out of the money (Out the Money). If the base price is close to the current market price of the base value, the warrant is on the money (at the money). If the base value is quoted above the base price of a call instead, the bill is in the money (in the money). The term "in the money" shows that this warrant has not only a current value but also an additional intrinsic value. Exercising the option right, in contrast to an “out of the money” and “at the money” warrant, would generate a profit. In the case of sell warrants (put), the so-called moneyness is mirrored. A sell warrant whose base price is below the current price of its base value is therefore out of the money. If, on the other hand, the underlying is trading below the strike price, the put is in the money.

The base price of the warrant usually remains the same for the entire term. Only in the event of a company's capital measures such as a capital increase, a share split or a capital reduction will the issuer of share or basket warrants adjust the base price and the subscription ratio.

If the warrants are based on underlyings that are quoted outside the euro currency area, the base price is usually given in the respective local currency.