Investopedia

Continue to Site »

Options Contract

Filed Under »
Dictionary Says

Definition of 'Options Contract'

A contract that allows the holder to buy or sell an underlying security at a given price, known as the strike price. The two most common types of options contracts are put and call options, which give the holder-buyer the right to sell or buy respectively, the underlying at the strike if the price of the underlying crosses the strike. Typically each options contract is written on 100 shares of the underlying.
Investopedia Says

Investopedia explains 'Options Contract'

For example, a trader believes that the price of a stock will rise from its current price of $40 to a level nearing $100. Rather than purchasing the stock itself, she can purchase a call option for a fraction of the price at a strike anywhere between $40 and $100. If the stock does indeed rise to $100, and assuming the call option was bought at a strike of $75, the holder stands to gain $25 per share on the contract, minus any premiums paid for the option itself.

Articles Of Interest

  1.

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.

  2. Naked Call Writing: A Risky Options Strategy

    Learn about this aggressive trading strategy to generate income as part of a diversified portfolio.

  3. Getting To Know The "Greeks"

    Understanding price influences on options positions requires learning about delta, theta, vega and gamma.

  4. Options Basics Tutorial

    Discover the world of options, from primary concepts to how options work and why you might use them.

  5. Options Risk Graphs: Visualizing Profit Potential

    With a single diagram, you can see how price, time and volatility affect potential gains.

  6. The 4 Advantages of Options

    Flexible and cost efficient, options are more popular than ever. Find out why.

  7. What do all of the letters in a stock option ticker symbol mean?

    The option ticker explains four main things about the option: the underlying stock, whether it is a call or a put option, the expiration month and the strike price. An option ticker is quoted ...

  8. Arbitrage Squeezes Profit From Market Inefficiency

    This influential strategy capitalizes on the relationship between price and liquidity.

  9. Making It Big On Wall Street

    Read about some of the most glamorous Wall Street jobs and what it takes to land one.

  10. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center