Stock Options

A stock is the value of a company’s assets and profits. It shows what the company is worth were they to sell off everything they own. For example Marks and Spencer, Google and Citigroup, each have stock which represents their value in the market place.

So, a stock option is when an owner either buys (in a call option) or sells (in a put option) the stock of a particular company. For example, Owner X may believe that the performance of Company Y is improving and therefore may decide to buy stocks (call option) in Company Y, so that he can profit from the rising price of the company’s stocks. If the stocks of Company Y succeed in increasing, then Owner X will profit from buying the stock earlier at a lower price.

Stock options are a specific type of option, since there are different types available, stocks being just one of them. See anyoption™ for a list of stocks available for investment.

A stock option is a type of binary option. That means that the payout is determined at the onset of the contract. There are only two possible outcomes: or the option expires in-the-money and the owner receives a fixed amount of cash; or the option expires out-of-the-money and the owner receives nothing. However, with anyoption™, an owner receives 15% back if his option expires out-of-the-money.

Receiving a payment with a stock option is independent of the magnitude by which the price of the stock moves. For example, an owner may buy a call option for £100, expiring at the end of the day, for a return of 70% on the stock of Company Y, currently at 94.53 points.

If at the end of the day, the stock ends at 94.58 then the option has expired in-the-money and the owner will receive £170. They receive the full 70% payout, regardless that the stock only moved 0.05 points. This demonstrates the simplicity of stock options.