Tuesday, 29 May 2012


Many traders now a day intend to shift from cash market to option market ,here is a comparison made to make it easy for them.

What is an option?
An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset (a stock or index) at a specific price on or before a certain date.
An option is a derivative. That is, its value is derived from something else. In the case of a stock option, its value is based on the underlying stock (equity). In the case of an index option, its value is based on the underlying index (equity).

An option is a security, just like a stock or bond, and constitutes a binding contract with strictly defined terms and properties.

Options vs. Stocks

1) Listed Options are securities, just like stocks.
2) Options trade like stocks, with buyers making bids and sellers making offers.
3) Options are actively traded in a listed market, just like stocks. They can be bought and sold just like any other security.
1) Options are derivatives, unlike stocks (i.e, options derive their value from something else, the underlying security
2) Options have expiration dates, while stocks do not.
3)There is not a fixed number of options, as there are with stock shares available.
4)Stockowners have a share of the company, with voting and dividend rights. Options convey no such rights.


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