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Stock Options – What Are They?

Stock is the entire shares in which ownership of a particular company is divided in multiple owners. In common terminology, the common shares are also called as “stock.” Each single share of stock constitutes fractional ownership in relation to the total number of outstanding shares. These shares have no legal status and can be traded only among corporations in registered brokers’ offices.

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The main reason of investing in stocks is so that you can gain long-term capital gains. There are many different types of capital gains and some of them are commonly known as dividends. All such gains are realized when you sell your shares at a price higher than the purchase price. Similarly, you can also make purchases at any time and sell your shares at any time for realized gain.

Every type of security in the market is related to a particular company. It signifies ownership rights, i.e., it indicates the right to receive dividends. The stock is the most common form of investment nowadays, with almost every person owning some stocks in the corporation. The corporation itself can issue shares of its stock for sale to the public. However, shares of stock are not transferable between parties, except when the corporation issues its own stock as a result of an employee stock purchase program.

The value stocks pay dividends to their shareholders. The value stocks usually offer a higher return than the dividend per share paid by the corporation on its shares. Value stocks pay dividends at pre-determined intervals. The purchaser of a company’s shares pays the dividend, and the company makes money from the interest earned by the fund.

You cannot lose money by owning stock options. Although these options are not as liquid as owning stock, you can buy or sell them according to your need. If a particular business is expected to show good profits in the near future, you can buy shares now and wait for further rise in the share price. Conversely, if the business is not expected to attain good profits in the near future, you should sell the options because the profit from the option will help cover the costs of paying the dividend.

The call and put options represent ownership rights of a stock. They affect the price of the stock. Buyers of call options to purchase shares from the seller for a specified price, while sellers of put options are allowed to sell the same shares to their purchasers for a specified price. Call and put options are among the most popular investment options, especially among new investors.