Stock Futures V.S Stock Options

There is a common misunderstanding between the phrases stock options and stock futures. There's one important distinction between the two to be aware of. Both let you purchase equities at a certain price on a predetermined date in the future. On the other hand, stock futures are legally enforceable agreements that require you to complete the transaction. You must purchase the shares at the agreed-upon price on the designated day.


The right to purchase a certain quantity of business stock at a predetermined price, referred to as the "exercise" or "strike price," is what a stock option entails. Over a predetermined amount of time known as the "vesting period," you really become the owner of granted options. Options vesting indicates that you've "earned" them, but you still have to make progress.


Conversely, stock options provide you the opportunity, but not the obligation, to purchase the agreed-upon stock at the specified price and date. You have the option to let the contract expire without making a purchase.



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