Definition of Outstanding Stock Options

Features

Option contracts have intrinsic and monetary value. Each contract can be exercised to buy or sell the underlying stock, bought or sold on the open market, or allowed to expire with no action or value.

Significance

The outstanding contracts can be short- or medium-term investments. They can be traded for the relatively small price of the contract or exercised for the much larger investment of the underlying stock.

The Facts

Investors need to know the price of each open contract and that each contract represents 100 shares of underlying stock.

Types

American-style options are simple options that can be exercised any time between the purchase and the expiration date of the contract. European-style options can be exercised only at the end of the contract.

Considerations

Expiration dates are important to manage, because missing one can cause the owner to either lose the chance to purchase stock at an attractive price or to allow stock he owns to be bought away from him at an unattractive price.