So what are "options" , as in "option trading" then?

Question

"The basic trades of traded stock options" which are "like" stocks"

If option trading means you aren't actually trading stocks, then what are you trading?

Answer 1

Stock options give you the "option" to purchase shares of stock at the current price, on a later date. So, if my employer gives me options today, and the stock price is $25 today, that means that I can purchase a share of stock for $25 in the future. If the stock goes up to $35 a year from now, then I still get to purchase it at today's price of $25 so the option is worth $10.

I hope that makes sense!

Answer 2

An option is a contract which gives one party, known as the buyer or holder, the right to trade an underlying asset from the other party, known as the seller or writer, for a fixed price for a specified time period. If the underlying asset is stock, it is a stock option.

"Call" options give the holder the right to buy the asset. "Put" options give the holder the right to sell the asset.

In the United States there are two common forms of options, exchange traded options and employee stock option plan (ESOP) options. ESOP options are call options given to key employees as part of their compensation package and are not part of traditional option trading.

Exchange traded options are traded in the same manner that stocks are traded. There is a bid price and an ask price for each option. Unless the options is of so little value that the bid price is $0.00, you can sell an options for the bid price or buy an option for the ask price any time the market is open.

If you want a more complete explanation of options I suggest you take the free "Options Overview" tutorial at

http://www.cboe.com/LearnCenter/Tutorial...

Answer 3

Options are financial instruments that convey the right, but not the obligation, to engage in a future transaction on some underlying security, or in a futures contract. In other words, the holder does not have to exercise this right, unlike a forward or future.