1. Options give the investor the right to buy or sell the underlying asset or instrument.
2. If you buy options, you are not obliged to buy or sell the underlying asset, you just have the right. Meaning, you can choose to buy the options, sell the options or do nothing and let it expire, depending on what is most advantageous to your position.
3. Options are either call or put. Call options give the power to the buyer to buy the options. Put options give the buyer the right to sell the options.
4. Options are quoted per share, but are sold in 100 share lots. Meaning, if the investor purchases 1 option, he or she is buying 100 shares.
5. The investor only has to pay the option premium and not the total amount of shares like if you are buying per stock. For example, if the option premium of a $50 stock is $3, the total amount of the contract is $300 per option. So if the investor is buying 3 options at $3 per option, since he or she is buying in 100 share lots, the total payment would be $900 (3 options x 100 shares per option x $3 option premium).
6. Buying shares is different. You have to pay per share. For example, the stock price of...
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