An option is a contract that gives you the right — but not the obligation — to buy or sell a stock at a set price before a set date. Small cost, big leverage, real risk.
A stock option is a contract tied to an underlying stock. It gives the buyer the right, but not the obligation, to trade that stock at a fixed price (the strike) on or before a fixed date (the expiration). For that right you pay an upfront cost called the premium.
There are two kinds. A call is the right to buy at the strike — you want it when you expect the price to rise. A put is the right to sell at the strike — you want it when you expect the price to fall. One contract usually controls 100 shares, which is where options' leverage comes from.
At expiration a call is worth the amount the stock is above the strike (and worthless if below). Your net profit is that payoff minus the premium you paid. Because you only risk the premium but control 100 shares, a small move can produce a large percentage gain — or the premium can expire worthless, a 100% loss on the contract. This asymmetry is what our options trading game lets you feel safely.
Time is the enemy of buyers: options lose value as expiration nears (time decay). Being right on direction but wrong on timing can still lose money.
Options are powerful but complex, and most beginners lose money trading them. They reward a clear understanding of strike, expiration, premium and probability.
Try it risk-free: Buy a call or put, set a strike, and watch it expire to learn payoff in the options trading game with play money — no sign-up, no real risk.
Not advice: educational content only. For authoritative basics see the SEC at investor.gov.
Related: options trading game, market volatility, and risk vs reward.
It is a contract giving you the right, but not the obligation, to buy or sell a stock at a set strike price before a set expiration date, in exchange for an upfront premium.
A call is the right to buy at the strike and profits when the stock rises; a put is the right to sell at the strike and profits when the stock falls.
The premium is the price you pay to buy the option. For a buyer it is the most you can lose, while it gives control over 100 shares per contract.
Options can expire worthless, causing a total loss of the premium, and they lose value over time through time decay. Their leverage magnifies both gains and losses.