Understanding Outstrike in Options Trading

Outstrike refers to a situation where a company's stock price falls below the strike price of its options contracts, making the options contracts worthless. This can happen when the underlying stock experiences a significant decline in value, leading to a decrease in the option's intrinsic value.

For example, let's say that you own an option to buy 100 shares of XYZ stock at a strike price of $50 per share. If the current market price of XYZ stock is $30 per share, then your option is underwater, meaning it has no intrinsic value. In this case, the option is said to be "out of the money."

Outstrike can be a significant risk for options traders, as it can result in the complete loss of their investment. It's important for options traders to carefully monitor the underlying stock's price and adjust their positions accordingly to avoid outstrike.