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What are options?

Contracts that give the right, not the obligation, to buy or sell.

4 min · Beginner · Lesson 2 of 17

Step 1 of 5

A contract on a stock

An option is a contract tied to a stock (the underlying). It gives the buyer the right, but not the obligation, to buy or sell 100 shares at a set price (the strike) on or before a set date (the expiration).

The buyer pays the seller a price for that right, called the premium. If using the right isn't worthwhile by expiration, the option can expire worthless and the premium is gone.

For entertainment and education, not investment advice.