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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
A contract giving you the right (not obligation) to buy or sell a stock at a set price.
Why It Matters
Options let you control 100 shares for a fraction of the cost. A $500 stock would cost $50,000 to buy 100 shares, but an option might cost $500-2,000. This leverage is why options can return 100%+ gains - or 100% losses.
Key Points
- Each option contract controls 100 shares of stock
- Options have expiration dates - they're not forever like stocks
- Most options expire worthless, so beginners should start with paper trading
Related Terms
Common Questions
A contract giving you the right (not obligation) to buy or sell a stock at a set price. Options let you control 100 shares for a fraction of the cost. A $500 stock would cost $50,000 to buy 100 shares, but an option might cost $500-2,000.
Options let you control 100 shares for a fraction of the cost. A $500 stock would cost $50,000 to buy 100 shares, but an option might cost $500-2,000. This leverage is why options can return 100%+ gains - or 100% losses.
Each option contract controls 100 shares of stock
Options have expiration dates - they're not forever like stocks
Most options expire worthless, so beginners should start with paper trading