News
December 2019

What is a Stock Option?

stock option is a financial contract that grants certain rights to its holder and creates specific obligations for its seller. There are two types, calls and puts. A call option provides its holder (buyer) the right to buy the security that underlies the option at a specific price, called the strike price or exercise price, for a set period of time. The call seller, meanwhile, is obligated to sell the option's underlying security at the strike price if the option is exercised. A put option provides its holder with the ability to sell the option's underlying security for a specified price for a specified time period. The put seller is obligated to buy the underlying at the strike price if the option is exercised. 

In the United States, listed equity options are traded on exchanges, and these trades are cleared by The Options Clearing Corporation (OCC), the sponsor of The Options Industry Council (OIC). The options market in the U.S. trades millions of put and call option contracts every day, providing investors with a way to manage risk and potentially generate income. Buying and selling options, however, has several important aspects that need to be understood before investors add these assets to their investment plan. At OIC, we have several ways to begin your learning journey, including our Options Basics page and with the disclosure document called Characteristics and Risks of Standardized Options.

 

Sponsored By:

  • OCC

OIC Participant Exchanges:

  • BOX
  • Cboe
  • MIAX
  • Nasdaq
  • NYSE

OCC 125 South Franklin Street, Suite 1200 | Chicago, IL 60606

This web site discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this web site is to be construed as a recommendation to purchase or sell a security, or to provide investment advice. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606.

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