Stock option

A type of derivative which gives the holder the right to buy or sell a certain number of shares

More specifically, in the case of a call option this means the right to buy a defined number of shares at an agreed price (the exercise price) within a specified period, while in the case of a put option it means the right to sell a defined number of shares at the exercise price at a specified time.

Options are a type of futures transaction; the seller of an option is also known as the option writer. If the option is exercised, the buyer receives a certain number of shares; the option fee is payable whether or not the option is exercised. In return, the buyer has the chance of receiving a significantly higher price if the shares covered by the option have risen in value.

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