The strike price, also known as the exercise price, is the predetermined price at which the buyer of an option can purchase (call option) or sell (put option) the underlying asset. It is the price at which the option holder can exercise their right to buy or sell the underlying asset.

The strike price is set at the time the option is created and remains fixed regardless of the market price of the underlying asset. The strike price is a critical component of an option contract, as it determines the profitability of the option and the potential gain or loss for the buyer and seller.

For example, if a call option has a strike price of $50, the buyer of the option has the right to purchase the underlying asset at $50, regardless of the current market price. If the market price is above $50, the option is considered "in the money," and the buyer can exercise the option to purchase the asset at the lower strike price. If the market price is below $50, the option is considered "out of the money," and the buyer is unlikely to exercise the option.

Similarly, if a put option has a strike price of $50, the buyer of the option has the right to sell the underlying asset at $50, regardless of the current market price. If the market price is below $50, the option is considered "in the money," and the buyer can exercise the option to sell the asset at the higher strike price. If the market price is above $50, the option is considered "out of the money," and the buyer is unlikely to exercise the option.