Options trading
Option
Definition
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price on or before a set date. A standard US stock or ETF option covers 100 shares. Start with our options trading for beginners guide.
Example
Suppose you pay $1.20 per share for an option giving you the right to buy a $40 stock at $45 within three months. Because one contract covers 100 shares, it costs $120. If the stock never climbs above $45, nothing forces you to buy: you let the option expire, and your loss stops at the $120 you paid.
Hypothetical numbers, for illustration only.
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