Traditional Culture Encyclopedia - Traditional virtues - What's the difference between options and stocks?
What's the difference between options and stocks?
They are different in the following aspects:
1. Definition: Stock is the ownership certificate of the company, which means that the holder has a certain proportion of ownership in the company. Option is a financial contract that gives the holder the right to buy or sell a certain number of shares at a certain price at a certain time in the future.
2. Rights and obligations: Shareholders have the ownership of the company and enjoy corresponding rights and interests, such as dividends and voting rights. Option holders have only rights, but no obligations, and can choose whether to exercise options and exchange corresponding underlying assets.
3. Term: The stock has no expiration date and the holder can hold it all the time. This option has a specific expiration date, after which it will be invalid.
4. Risks and benefits: Stock holders bear the risks of company performance and market fluctuation, and may get the benefits of stock price rise and dividends. Option holders bear the cost of purchasing options. If the stock price does not meet the conditions for exercising the option, the option may lose its value.
5. Leverage effect: Option has leverage effect, because the holder can speculate and arbitrage at a lower cost. There is no leverage effect in stocks, and the holder needs to pay the full cost of buying stocks.
Generally speaking, the stock is the proof of the company's ownership, and the option is a financial contract that gives the holder the right to buy or sell the stock at a specific price in the future. They are different in rights and obligations, time limit, risk return and leverage effect.
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