Strike, Expiration, and Premium
The three numbers that define an option trade: how strikes and expiration dates are set, how the premium changes across them, what moves a premium from day to day, and how to read a table of option prices.
The short version
The strike price and the expiration date are fixed terms set by the options market, which lists many of each for the same share. The premium is different: it's a price, agreed between buyers and sellers and changing all day. For a given share, a call costs less the higher its strike, and any option costs more the longer it has to run, though less per day. The premium responds mainly to the share price, the time left, and how much the share is expected to move. A low premium always comes with a break-even that's further away.
By the end of this lesson, you'll be able to
- Distinguish an option's standardized terms from its premium
- Read a table of option prices across strikes and expirations and work out the break-even for each
- Name the main factors that raise or lower a premium
Why this matters
Calls and Puts used one call and one put. In a real market there isn't one call on a share. There are many: a grid of strike prices running across a series of expiration dates, each with its own premium. Anyone using options is choosing a square on that grid, and the three numbers that locate it interact. A cheaper option is cheaper for a reason. This lesson explains the grid.
Two fixed terms and one price
Most options have standardized terms, among them the underlying share, the exercise price, the expiration date, and whether the option is a call or a put. Options with the same terms are identical and form a series.1 The buyer and seller don't negotiate these. They pick from what's listed.
The premium isn't a standardized term. It's the price agreed between buyer and seller in the market where the option trades, it isn't fixed by the exchange or by the Options Clearing Corporation, and it changes continuously. The standard options disclosure document is blunt about what it is: not a down payment, but a nonrefundable payment in full for the rights the option conveys.1
Strikes
The options market sets the exercise prices for each series when it's introduced, generally at levels above and below the current market value of the share. It can add new strikes as the share price moves or as investors show interest.1 So a share trading at $50 will have strikes listed on both sides of $50, and if it climbs to $70, new strikes appear around $70 while the old ones stay until they expire.
Expirations
The expiration date is the date on which the option expires, fixed by the market where the series trades.1 Several cycles run side by side.2
- Monthly options are the traditional structure, expiring on the third Friday of each month.
- Weekly options are short-term contracts usually listed with at least a week to run. Friday is the most common expiration day for options on single shares.
- Daily options are a newer type that expires on the day it's listed.
- Long-term options, known as LEAPS, expire up to two years and eight months ahead.
The rest of this lesson is for members
Still to come in this lesson: Reading an option chain, The same strike across time, What moves a premium, What a contract really costs, the key takeaways, and 2 quiz questions with explanations.
Membership opens every lesson in the curriculum, the capstone projects, the interactive tools, and the members-only channels in the Hyperion Entities Discord. The first lesson of every module stays free.
Go deeper
- Intrinsic Value, Extrinsic Value, and MoneynessDerivatives (depth track)
- The GreeksDerivatives (depth track)
- Implied VolatilityDerivatives (depth track)
- Calls and PutsDerivatives (depth track)
Notes and sources
- The Options Clearing Corporation. Characteristics and Risks of Standardized Options. Checked 2026-10-13. Back to text
- FINRA. Options. Checked 2026-10-13. Back to text