Learn what a stock option is, how strike price and expiration matter,
A stock option is a contract or compensation grant that gives the holder the right, but not the obligation, to buy or sell a stock at a stated price before or at expiration. The exact meaning depends on context, but the core idea is the same: the payoff depends on the stock price relative to the strike price.
In trading markets, stock options are listed derivatives such as calls and puts. In compensation plans, a stock option is often the right to buy employer shares at a set exercise price after vesting. In both cases, value depends on time, volatility, and whether the market price moves favorably relative to the strike.
This matters because options change risk exposure without requiring outright ownership of the shares. They are used for speculation, hedging, and employee incentives, but each use case comes with different valuation and tax issues.