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Stock Options: What They Are and How They Work

By Lyle DalyUpdated Apr 3, 2025 at 1:37 PM

Key Points

  • Stock options grant the right to buy or sell a stock at a set price and are profitable if predicted accurately.
  • Employee stock options (ESOs) allow employees to buy company stock, tying compensation to company performance.
  • Options are risky; they lose value over time and need precise market timing predictions.

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