Stock options are a sort of alternative pay offered by some organizations, notably many startups, as part of their employee benefits package. Employees join at a lower-than-average salary in exchange for the chance of a large payout later on. If you've been given options as part of a compensation package, make sure you understand how they function before exercising and selling them. A financial advisor could assist you in developing a financial strategy for your stock options or other investments.
Mentioned below are the characteristics of Stock options:
Options allow a trader to not only bet on a stock rising or falling but also to specify a specific date when the stock is expected to climb or decrease. The expiration date is what it's called. The expiration date is significant because it aids traders in determining the time value of the put and call, which is employed in various option pricing models.
Whether or not an option should be exercised is determined by the strike price. A trader would expect the stock to be above or below this Price by the expiration date. A trader might buy a call for a specific month and strike price if they believe IBM will rise in the future.
Contracts denote the number of underlying shares that a trader wants to purchase. One hundred shares of the underlying stock are equal to one contract.
The premium - is the price paid for an option. It is calculated by multiplying the call price by the number of contracts purchased, then multiplying by 100.