Stock options layman's terms

CFA Level I Quant
#1

Hi i am an engineer studying for cfa L1… so often come across things that i cant understand fully… like what exactly are stock options… can some one explain that in layman’s terms with examples…:slight_smile:

#2

Have a look at this first:

“It’s gonna get harder before it gets easier. But it will get better, you just gotta make it through.” :wink:

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#3

its an option to buy an investment at a certain price within a specified time.
like i can pay 1 dollar for an option to buy something at 100 dollars for the next 3 months. every cent after 101 dollars is profit to me. if it below 100 dollars then my option is wworthless nd i lose everything

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#4

Stock option is like a scratch ticket. If you sell an option, you receive a small amount (aka premium), but might have to pay up big if the option buyer’s view is realized. If you buy an option, you can only lose the premium, but you might win big.

Owning the option gives you the right, but not the obligation, to buy (a call option) or sell (a put option) a stock at a specified price.

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#6

Thanks a lot guys