Overview
What is it:
The strike price is the fixed price at which you're entitled to purchase shares under a Stock Option, set at the time of grant and unchanged for the life of the option regardless of where the stock later trades.
Why does it matter:
The strike price is a key piece in determining the value of your stock option grant. The value of your options is measured as the spread between the strike price and the current stock price, if the stock price is higher. If the current stock price is below the strike price, then the options have no value and are considered Out-of-the-Money.
What do people most often get wrong:
People often assume the strike price is something the company can set wherever it wants, the way you might negotiate a salary number. In most cases it isn't discretionary: tax rules generally require the strike price to equal the stock's fair market value on the grant date, and setting it any lower can trigger significant tax penalties for the recipient. This is why you generally can't negotiate a below-market strike price into an offer, even when other terms of an equity grant are negotiable.