Stock Market Investors » Glossary of Stock Terms » What is an Option?

What is an Option?

When an investor becomes an owner of an option s/he has the right to buy or sell a pre-determined number of shares of stock. The price of the stock is predetermined as well. However it is worth noting that the owner is not obliged to execute his/her right.

You can buy or sell an option on the open market. Many employers are starting to make options part of employees' compensation plans. The options are granted based on such factors as employee's performance.

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