Buying Stock Options

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To buy stock options, work with a brokerage firm, make sure you are authorized to purchase option contracts, be aware of possible restrictions, and pay the appropriate fees. Understand that buying stock options can be risky and comes with requirements that need to be met with information from an investment manager in this free video on stock options.

Part of the Video Series: Stocks & Mutual Fund Investments
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Video Transcript

Okay, buying stock options. To buy a stock option, first you're going to work with your brokerage house, whether it be a physical office or online trading platform. And you need to have options contracts usually checked off as something that is authorized for you to do in the account. Not everybody wants to do option contracts. And options contracts will require either experience in the past, having done those with certain houses. Other times, they want to see a minimum account balance. There are some restrictions, because option contracts are on the speculative end. And to purchase the option contract, really you're just going to look at a selection of contracts on particular equities that are being offered. And you either purchase something that is going to give you the option to purchase a stock at a particular price, or sell the stock at a particular price. And that really is the essence of the options contracts. And you're going to pay a fee for the option contract, itself, and then you're going to owe the money for the underlying equities. So, also, further fees with options contracts you need to be aware of. So, that really is the basis. And just make sure that wherever you're trying to buy the contracts, whatever brokerage house you're using, has you authorized to trade with options.

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