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A stock option (also known as an equity option), gives an investor the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date. There are two types of options: puts, which is a bet that a stock will fall, or calls, which is a bet that a stock will rise.
An equity option is a contract that conveys to its holder the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) shares of the underlying security at a specified price (the strike price) on or before a given date (expiration day).
Equity option example Let's say that Alphabet shares are trading at $730. You buy an option to purchase shares of Alphabet before the end of the week at $800, and pay a premium of $25 to do so. If Alphabet's share value exceeds $825, then the trade is in profit, and you are free to execute the trade.
Advantages of Options They may provide increased cost-efficiency. They may be less risky than equities. They have the potential to deliver higher percentage returns. They offer a number of strategic alternatives.
An equity option is a contract that conveys to its holder the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) shares of the underlying security at a specified price (the strike price) on or before a given date (expiration day).
Stock option grants are how your company awards stock options. This document usually includes details about: The type of stock options you'll receive (ISOs or NSOs) The number of shares you can purchase. Your strike price.