What are stock options?
Stock options are a rather complicated form of investment which has recently attained a degree of popularity among more sophisticated investors. Let’s look first at the idea of options in general. You probably know when you lease a house with an option to buy, this means that any time within a stated period you have a right to purchase that house at the agreed price. If you wish, however, you may ignore the opportunity altogether and let the option lapse. You alone make the decision. It could be that during the option period the house increases handsomely in value so it would be advantageous for you to exercise the option to buy it at the lower price previously agreed upon. If, however, the house goes down in value during the option period you may let the option expire; then, what you spent for the option is likely less than the loss you might have suffered had you purchased the house in the first place. Stock options work this way too. You may buy an option from someone who is willing
