Stock options, which give you the right to buy or sell stock at a specific price during a specific time frame, can be traded as a cheaper and less risky alternative to taking actual ownership of stocks. The downside to options is the fact that they have an expiration date and don’t confer ownership of stock. Call options let you buy stock, which means you can potentially gain by buying a stock for significantly less than it is actually worth in the future. Put options let you sell, which can let you dodge a loss by selling a falling stock for more than it is presently worth.
- An option is the right to buy or sell a stock or security during a specified time period and for a specified price.
- Stock options are cheaper than stock, but you don’t actually have the stock until you exercise your option.
- A put option allows you to sell a security, or stock, for a specified price, during a specified time period.
“One way you can gain access to the market without the risk of actually buying stocks or selling stocks is through options.”