What is a Stock Option?
Answer:
Stock options are privileges that are bought


and sold from one party to another giving the buyer the right to buy or sell the stock at an agreed upon price on a specific date or within a certain time period. The buyer is not obligated to do so if they don’t want to, they merely have the option to do so if they desire.

There are two types of options: American and European. American options can be exercised any time between the purchase date and the expiration date while European options can only be exercised on the date it expires.

Stock options have the following information: the name of the associated stock, expiration date, strike price, and premium paid (plus broker’s fees).

Calls and puts are the two most popular types of stock options. When you own a call, you own the right to purchase the stock at the strike price before the stock option expires. Once the stock option expires, it is worthless.

Puts are the opposite of calls. When you own a put, you own the right to sell the stock at the strike price before the stock option expires.
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