A comprehensive guide to what stock options are, how they work, and the variables that impact them.
Learn MoreStock options are financial instruments that give the holder the right, but not the obligation, to buy or sell a stock at a predetermined price (strike price) within a specified period. They are commonly used for trading, investing, or as part of employee compensation plans.
Call options give the holder the right to buy a stock at the strike price. Investors use them when they anticipate an increase in the stock's price.
Put options give the holder the right to sell a stock at the strike price. These are useful for hedging against potential price declines.
Stock options derive their value from an underlying stock, and their price fluctuates based on the stock's price movements.
The price at which the holder can buy or sell the underlying stock.
The date by which the holder must exercise their option.
The cost of purchasing the option, determined by market forces.
The difference between the stock price and the strike price (for in-the-money options).
The portion of the premium based on the time remaining until expiration.
Measures how much the stock price fluctuates, impacting the option's value.
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