Stock Option

Stock options are a type of equity derivative, also referred to as equity options. An option is a financial product that is considered a derivative, which means that the value of the underlying asset or security determines or is derived from the value of the option. In the case of stock options, the company's shares (or an index of stocks) serve as their underlying asset. An investor who purchases a stock option has the right, but not the responsibility, to buy or sell the shares at a predetermined price and time. Options come in two flavors: puts, which bet on the stock falling, and calls, which bet on the price rising.