Definition: The Strike Price is the price at which the holder of a stock option may purchase the stock.
If the strike price is below the price at which the stock is trading on the open market, the option holder may be able to make a profit. If the stock price on the open market is below the strike price, the options are said to be "underwater". It would make no sense to exercise an "underwater" option because that would mean buying the stock through the stock option at a higher price than you would pay on the open market.
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Examples:
An employee is issued a stock option grant of 100 shares of company XYZ at a strike price of $6, but must hold the options for one year until they vest. After one year, the employee may exercise the option and purchase 100 shares of XYZ for $600. If XYZ is trading for $12 on the stock market, the employee may sell those 100 shares for $1200, less commissions and other brokerage fees.
