| Stock options are rights that a stockholder is entitled | | | | The two options that a buyer has on his stocks are |
| to as far as his investment is concerned. The rights | | | | either a call or a put option. A call option is the right |
| give him a choice to sell or buy some particular | | | | to buy or purchase a stock at the strike price but |
| securities underlying that stock at a given price on a | | | | one is not obligated to do so. A put option is the |
| given date if he so wishes. However, note that, | | | | right, but not the obligation to sell your stocks at the |
| there is quite a difference between stocks and | | | | determined price, on or before the expiry date. |
| options as they are two different entities. | | | | During the trading of the options, it is worth noting |
| Stocks, as they are well known are types of | | | | that if an investor decides to sell the option, he is |
| securities that an investor can buy, just like bonds, | | | | creating a security that did not exist before. |
| shares or treasury bills. Options on the other hand are | | | | This is what is commonly known as writing an option. |
| options that are placed on all the different types of | | | | If one decides to sell their rights, they become |
| securities there are, but again depending on the | | | | obligated to sell the stocks that were under the |
| policies and the laid down regulations of the issuing | | | | option, way before the expiry date. Since an option |
| company. Just like stocks, options also come in | | | | gives time for speculation, when they are traded |
| different types. However, unlike stocks, options have | | | | way before expiry date, the chances for losing are |
| got an expiry date, upon which the right to sell or | | | | high because then the stocks may not have hit the |
| buy should have been exercised or the buyer just | | | | targeted price. |
| forgoes the right. | | | | |