A Beginner's Guide to Buying Stock Options Stock options are financial contracts that give you the , but not the obligation , to buy or sell a stock at a set price before a certain date. While they offer powerful benefits like leverage and risk management, they are more complex than simply buying shares. Core Concepts You Must Know
: The pre-agreed price at which you can buy or sell the stock.
: This is the "fee" you pay upfront to own the contract. If you see a premium of $2.50, the actual cost is $250 ($2.50 × 100 shares).
: One standard options contract typically controls 100 shares of the underlying stock.
: The "due date" for the contract. After this date, the option becomes void and worthless.