What is an Option? - The Basics

A stock option is a contract that gives the buyer the right, but not the obligation, to buy or sell a certain number of shares in a company at a specified time at a fixed price.

There are two kinds of options, and they are always defined using the same basic terms.

The terms “Calls” and “Puts” tell you whether you have the right to buy or sell the shares of the underlying company.

The Ticker Symbol tells you which company shares the options are on. The ticker symbol for Apple is (AAPL).

The Expiration Date is when the contract ceases to be valid.

The Strike Price indicated the price at which you have the right to buy or sell shares.

For example, if you buy one of the Apple June 17, 2016 $110 calls, it gives you the right to BUY 100 Apple shares at $110/share any time on or before June 17, 2016. If Apple shares then rise, you make a profit. This is a bullish bet.

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