by Charlotte Wood
(last updated February 21, 2009)
You hear all this stock jargon on television, in movies, in books and it's possible you have no idea what they're talking about. With terms floating around like bonds, bull market, bear market, and options how do you make sense of it all? Reality is, you can't make sense of all of it all at once; you need to take it one step at a time. So today let's focus on stock options and understanding what those are.
Stock options essentially give you rights to buy and sell and allow you to do more with your money. What options do is allow you to greater diversify your portfolio and take better control of your money. When you have a stock option, you have the right to carry on a future financial transaction with underlying security. So you can buy a stock at a later date for a price you set earlier and you can sell a stock for a price earlier agreed upon. It's a financial contract to which, if signed, the other party must adhere.
Options usually include:
After this there are a few different options to choose from:
These are the basics of options however this is only the surface. There are more options within the options and the best way to decide if and what options are best for you is to talk to your investment advisor. Now you know the fundamentals, you should be able to go in with some degree of knowledge and competency.
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