Payoff Lab: Strike Comparison
How strike changes the upside cap and the premium-versus-participation tradeoff.
#Three capped payoffs
A lower strike reaches its flat region earlier. A higher strike keeps rising over a wider Stock Token price range. Premium is omitted so the geometry remains comparable.
#Economic comparison
| Strike choice | Premium tendency | Upside retained | Rally underperformance |
|---|---|---|---|
| Lower | Generally larger, all else equal | Less | Begins earlier |
| Near spot | Often substantial time value | Little before cap | Begins near spot |
| Higher | Generally smaller, all else equal | More | Begins later |
#Compare the complete payoff
Premium alone does not rank strikes. Compare the terminal payoff, term, implied volatility, liquidity and economic notional together.