Stock Option

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DEFINITION of 'Stock Option'

A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

In the U.K., it is known as a "share option".

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BREAKING DOWN 'Stock Option'

American options can be exercised anytime between the date of purchase and the expiration date. European options may only be redeemed at the expiration date. Most exchange-traded stock options are American.

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