Options

A call option gives the buyer of the option, the right but the not the obligation to buy a fixed number of stock at a fixed price at a fixed time in the future. A put option gives the buyer of the option, the right but not the obligation to sell a fixed number of stock at a fixed price at a fixed time in the future. For example, consider the case where someone had bought a call option on IBM at $60 expiring on 21 December 1995. On the expiration date, if the price of IBM was above $60 then it would be worth the buyers time to ``exercise'' or take up his/her right to buy IBM at the prearranged price of $60 and sell it into the market at a higher price. A European option can only be ``exercised'', or delivery of the stock forced by the buyer, at expiration. An American option can be exercised at any time up to and including expiration. Read more on all about options.