Similarities and Differences Between Options and Stocks

In order for you to better understand the benefits of trading options, you must first understand some of the similarities and differences between options and stocks.

Similarities

• Listed Options are securities, just like stocks.
• Options trade like stocks, with buyers making bids and sellers making offers.
• Options are actively traded in a listed market, just like stocks. They can be bought and sold just like any other security.

Differences

• Options are derivatives, unlike stocks (i.e, options derive their value from something else, the underlying security).
• Options have expiration dates, while stocks do not.
• There is not a fixed number of options, as there are with stock shares available.
• Stockowners have a share of the company, with voting and dividend rights. Options convey no such rights.