Stock option

Stock option is a contract which contains the right to buy/sell on an individual stock at the certain price on a particular date (expiration date).

Unlike futures options, stock options do not depend on the underlying stock lifetime since in this case they are considered as perpetual (apart from cases of the bankruptcy of companies). So, they have lower risks since the underlying asset the option is based on does not have an expiration date.

The shares themselves are affected only by price risk, they have high volatility and due to this factor stock options are one of the favorite tools for investors to get an excellent risk-reward ratio, which determines the success of long-term trading.