A Basic Guide To Stocks And Options – What You Should Know
February 4, 2017
While most people have a fairly clear understanding of what stocks are, most only have a vague idea on what options are all about. You don’t need to worry, though, because, in this article, we are going to tell you more about both.
The stock is a share of ownership in the issuing company. If for example, you buy three shares of Facebook, you own part of the world’s social media platform equivalent to three units of ownership. On the other hand, options are derivatives of stocks. There are so-called stock options where a stock is offered at a fixed price, usually discounted, for a given period of time.
Stock options are provided by startup companies to attract talented employees. However, there are times when options are also offered to candidates for the significant management positions.
A regular stock is offered at the different stock market exchanges like NASDAQ and New York Stock Exchange (NYSE) Stock options, meanwhile, are offered privately.
If you want to buy good stocks, you can do so by going to broker websites homepage like Etrade and Scot-trade, where you can buy publicly-traded stocks that are found in the stock exchanges (NYSE and Nasdaq).
Whether or not you are buying shares from a broker or you have been offered stock options, you can only earn if there is a great appreciation in the price. For example, if you bought shares of a startup company for $5, you can only make money if the price increases to $10 and you sell it at that price. Of course, there are companies out there that offer dividends on their stocks, but it usually never happens.
What are dividends? They are profits distributed to stock owners, and they are generally only distributed if the company has had a great year in profits.