Exercise Price
Categories: Derivatives, Company Management
It's not about how much you pay to get in to your gym. It's the strike price of the stock option you own. So if you buy an option to buy a stock at a specific price, that specific price is the exercise price (a.k.a. the strike price).
Example
Let's say you joined GerbilDating.com in its infancy. You were granted 100,000 options at a $2 strike price. It's now publicly traded on NASDAQ. The stock just hit $40. You can exercise your options, paying $2 to GerbilDating.com to buy out that share of stock, and then sell it for $40 through your broker to net $38 in gain per share. The $2 you pay to buy the stock as you exercise the option is the exercise price.