Stock Options - Definition
Stock Options are financial contracts that grants the holder the right, but not the obligation, to buy or sell the underlying stock at a fixed price before expiration.


Stock Options Explained
Stock Options are derivative instruments, just like stock futures, which derives its value from the underlying stock. There are 2 kinds of stock options; Call Options and Put Options. Call Options give its holder the right to buy the underlying stock at a fixed price in the future while Put Options give its holder the right to sell the underlying stock at a fixed price in the future. Stock options are extremely flexible hedging as well as leverage instruments and can be used to either protect a stock portfolio or to speculate in a stock move for explosive profits.