What's an option?

Question

in the field of stock market

like buying stock option of a company at the nasdaq.

Answer 1

An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties.

The idea behind an option is present in many everyday situations. Say for example you discover a house that you'd love to purchase. Unfortunately, you won't have the cash to buy it for another three months. You talk to the owner and negotiate a deal that gives you an option to buy the house in three months for a price of $200,000. The owner agrees, but for this option, you pay a price of $3,000.
Now, consider two theoretical situations that might arise:
1. It's discovered that the house is actually the true birthplace of Elvis! As a result, the market value of the house skyrockets to $1,000,000. Because the owner sold you the option, he is obligated to sell you the house for $200,000. In the end, your profit is $797,000 ($1,000,000 - $200,000 - $3,000).
2. While touring the house, you discover not only that the walls are chock-full of asbestos, but also that the ghost of Henry VII haunts the master bedroom; furthermore, a family of super-intelligent rats have built a fortress in the basement. Though you originally thought you had found the house of your dreams, you now consider it worthless. On the upside, because you bought an option, you are under no obligation to go through with the sale. Of course, you still lose the $3,000 price of the option.

Answer 2

An option is a contract to buy or sell a specific financial product officially known as the option's underlying instrument or underlying interest. For equity options, the underlying instrument is a stock, exchange-traded fund (ETF), or similar product. The contract itself is very precise. It establishes a specific price, called the strike price, at which the contract may be exercised, or acted on. And it has an expiration date. When an option expires, it no longer has value and no longer exists.

Options come in two varieties, calls and puts, and you can buy or sell either type. You make those choices - whether to buy or sell and whether to choose a call or a put - based on what you want to achieve as an options investor.

http://www.888options.com/basics/whatis/default.jsp

Answer 3

If, as I suspect, you refer-to stock, then- I think it's a chance to buy at what you are gambling is a peak or near peak price with the understanding that you can sell at the price you paid for it ... when ... it ... takes ...a... drastic dip. The profit part is in your gamble that it WILL drop to a pre-selected (by you) date because part of the deal is your dough is sort of in escrow and you forfeit all of it if you guess wrong. (And make a killing if you guess right.)
Google Stock Options explained
This might sound more sensible to me had I mentioned - you only have to 'put up'. a deposit when you enter into the transaction although you do need to have the total amount in your brokerage account.

Answer 4

–noun
1. the power or right of choosing.
2. something that may be or is chosen; choice.
3. the act of choosing.
4. an item of equipment or a feature that may be chosen as an addition to or replacement for standard equipment and features: a car with a long list of extra-cost options; a telephoto lens option for a camera.
5. stock option.
6. a privilege acquired, as by the payment of a premium or consideration, of demanding, within a specified time, the carrying out of a transaction upon stipulated terms; the right, as granted in a contract or by an initial payment, of acquiring something in the future: We bought one lot and took a 90-day option on an adjoining one.
7. Football. a play in which a back has a choice of either passing or running with the ball.
–verb (used with object)
8. to acquire or grant an option on: The studio has optioned his latest novel for film adaptation.
9. to provide with optional equipment: The car can be fully optioned at additional cost.

Answer 5

Option is the right to sell or buy an underlying stock for a price at a future date. The right to sell an underlying stock at a predetermined price at a future date is called a 'put option'. The right to buy an underlying stock at a predetermined price at a future date is called 'call option'.

Options are also called derivatives since they are derived out of the underlying shares or stocks.

Answer 6

a call is the contractual right to buy a stock at a give price. A put is the right to sell a stock at a given price- so later you can cover by buying it.

Answer 7

An "option" is a choice or selection you can make--as opposed to having to settle with what you're given.

Answer 8

option is a thing that you can choose from. in computers an option is where you can edit your settings

Answer 9

A choice?

Answer 10

2 decisions or more