What does the option mean?
Ken Little Updated August 04, An option is a contract that gives the owner the right, but not the obligation, to buy or sell a security at a particular price on or before a certain date. Investors buy and sell options just like stocks. There are two basic types of options: The put option The Call Option The call option is the right to buy the underlying security at a certain price on or before a certain date.
You would buy a call option if you anticipated the price of the underlying security was going to rise before the option reached expiration. You could buy shares of the stock, or you could buy a call option. You could also simply trade the option for a profit without actually buying the shares of stock.
The Put Option The put option is the right to sell the underlying security at a certain price on or before a certain date. You would buy a put option if you felt the price of a stock was going down before the option reached expiration.
- What does option mean?
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- The financial product a derivative is based on is often called the "underlying.
- Whether you prefer to play the stock market or invest in an Exchange Traded Fund ETF or two, you probably know the basics of a variety of securities.
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Basic Option Facts Here are some quick facts about options: Options are quoted in per-share prices but only sold in share lots. The Strike Price or Exercise Price is the price the underlying security can be bought or sold for as detailed what does the option mean?
the option contract.
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You identify options by the month they expire, whether they are a put or call option, and the strike price. The Expiration Date is the month in which the option expires.
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All options expire on the third Friday of the month unless that Friday is a holiday, then the options expire on Thursday. Conclusion This quick overview of options gives you an idea of what they are all about, but it is the very tip of the proverbial iceberg.
Options are not for the beginning what does the option mean? but do offer advanced traders another tool for their investment arsenal.
Note: All option quotes in this article are for illustration only. Pricing of options is a complicated process involving many factors.