The Basics Of Stock Options
The Basics Of Stock Options
What Are Stock Options? Stock options are traded security that is a derivative product. By derivative product we mean that it is a product whose value is based upon or derived from the price of something else. Since we are talking about stock options, a stock options is based upon, among other things, the price of the underlying stock. There are also options on other traded securities such as currencies, indexes and interest rates, but here we will limit our discussion to stock options, or options based on stocks. A distinguishing factor of stock options is that is a depreciating asset in the sense that it has a limited life, and has to be used before the date on which it expires. As time goes by, the stock options lose value as it moves closer to its expiration date.
