What is a ‘Stock Option.’

The stock option can best be described as a free deal between two parties. This deal gives the buyer the right, though no obligation, to sell a stock at a previously set price within a given amount of time. The largest quantity of options are American options and can be exercised at any point in time between the purchase date and the option’s expiration date. European option also called “share option” work differently and can only be exercised on the date the option expires. Find some * good stocks to invest in here * .

What are Put and Call Options?

Stock options are then considered “call options” when the buyer agrees to contract to purchase the stock at a given price by a certain date. The same can be called a “pull option” if the buyer chooses to sell his stock at a specific price before a specified date.

The idea is sort of like a bet between the purchaser and seller. The buyer believes the value of the stock will increase by this time and the seller thinks the opposite may be true. The individual holding the options has the advantage of purchasing the stock at a discount price of the value of the stock increases before the expiration date. If the stock loses value before the expiry date, the option holder can sell the stock for a premium of current market value.

It is the strike price of a stock that indicates whether or not it is valuable. The strike price is the term given to the predetermined rate at which the two parties have agreed to buy or sell the stock. Call option holders will profit if the current market value has risen above the strike price. Put option holders benefit when the strike price has gotten higher than the current market value.

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