How do stock options work?

Answer by  maber (1427)

Stock options give you the option of buying a stock at a future date for a price that is set today.

Answer by  John (9008)

A stock option gives the option holder the option to buy a stock at a particular price. The idea is that if the stock price drops, they don't buy the stock and lose only the cost of the option. If the price rises, they can use the option and buy for less than its current value.

Answer by  diane41 (309)

An owner of call options has the right to buy the underlying stock at the strike price. A put owner has the right to sell the stock at the strike.

Answer by  Zoso (869)

A stock option is a price guarantee for a future stock purchase. For an option to buy one share of Microsoft April 15 2010 at $190 per share, if Microsoft trades at $220 that day, you exercise and profit $30. If trading at $75, you don't exercise your option.