Option Basics - Introduction

The series 4 exam is administered by FINRA and is required to qualify a person as Registered Options and Securities Futures Principal. It is recommended that candidates spend at least 60 hours preparing for the exam by reading . The series 4 material has been provided by The Securities Institute to help Investopedia visitors prepare for the exam.In order to successfully complete the exam it is recommended that you read the following material in addition to reading a full textbook and doing as many practice exams as you can.

An option is a contract between two parties that determines the time and price at which a stock may be bought or sold. The two parties to the contract are the buyer and the seller. The buyer of the option pays money, known as the option’s premium, to the seller. For this premium, the buyer obtains a right to buy or sell the stock depending on what type of option is involved in the transaction. The seller, because they received the premium from the buyer, now has an obligation to perform under that contract. Depending on the option involved, the seller may have an obligation to buy or sell the stock.

Option Classifications


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