Put or Call Option

Put option: A put option is a contract that provides an investor the option to sell a security.

Call Option: A call option is a contract that provides an investor the option to purchase a security.

With regard to each of these types of contracts, the investor has the right, but not the obligation, to exercise the option at a specified price (i.e., the “strike price”) until the contract’s expiration date.

Some put and call options may be purchased on the open market. As an alternative to exercising put and call options, investors can resell these options on the open market before their expiration.

Employee incentive stock options are call options. However, they may not be purchased or sold on the open market.

 

This guide is not intended to provide investment advice, and you should not rely on statements in this guide when making investment decisions.

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