Stock Option

See: Option. See: Call Option. See: Put Option.

It's a derivative. The right to do this or that, or the obligation to do this or that. An option on a stock might be a call option, i.e., the right to buy Disney stock for $150 a share any time between now and the third friday of the month 5 months from now. And, for that privilege, you've paid 5 bucks for that call option. So...that's a stock option.

What about a put option? Well, let's say you think DIS is goin' down down down in the next 5 months. It's trading for $136 today and you pay $7 for a put option, i.e. the right to sell it at $120 any time in the next 5 months. It has to drop below $113 in that time period for you to make money, but if it does, or goes way below, then you could make a lot of dough fast.

See: Derivatives. See: Employee Stock Option Plan.