Stock represents what a company is worth were they to sell off everything they own i.e. stock is their assets and their profits. It also helps determine a company’s value in the market place.

A stock option is when a buyer purchases either a call or a put option in the stock of a selected company. For example, Buyer A may believe that the performance of Company B is improving and may therefore decide to purchase a call option in the stocks of Company B. If the option expires above its strike price i.e. if the price of Company B’s stocks have risen, then Buyer A will profit from buying the option at its earlier lower price.

There are different types of options available, stock options being just one of them. Buyers may also trade commodity options, index options and currency (or forex) options. See anyoption™ for a list of stocks available for online investment.

Since a stock option is a type of binary option, there are 2 possible outcomes possible, all which are known at the onset of the contract.

The possible outcomes are: the option expires in-the-money and the buyer receives their investment amount back plus the return rate (with anyoption™ it’s between 61%-71%); or the option expires out-of-the-money and the owner receives nothing (however, on the anyoption™ platform, an owner receives 15% back if his option expires out-of-the-money). If the option expires at exactly the same level as the strike price and the investment is paid back in full to the buyer.

A main advantage of stock option trading online versus traditional stock trading, is that with a stock option, the payout is independent of the magnitude by which the price of the stock moves. For example, a buyer may purchase a call option for ?100, expiring at the end of the hour, for a return of 70% on the stock of Company B, currently at 165.896 points.

If at the end of the day, the stock ends at 165.897 then the option has expired in-the-money and the owner will receive ?170. He will receive the full 70% payout, even though the stock only moved 0.001 points. This demonstrates the simplicity of trading stock options.