How Do You Buy Stock With Options?
Some stock options, termed call options, give the holder the right to buy shares of a company at a specified “strike price” until the option expires (options giving the right to sell are called put options). Call options may be traded (on the Chicago Board of Options Exchange, for instance) or may be issued to senior employees by a company as a reward or incentive. Holders of the option aren’t obligated to exercise the option, but if they do, the issuer must complete the transaction. Step 1 Purchase a call option contract. Most traded options are “listed” (traded on an exchange) and follow a standardized 100 share contract. You pay a premium to the issuer (writer) of the option plus the difference between the strike price and the market price (if higher than the strike price). If the exercise price is equal to or lower than the strike price, you pay only the premium, which is under $1/share in most cases. Step 2 Wait until the price of the stock goes up enough to put you “in the money.
