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Buying an option to either buy or sell a stock

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Why would an investor buy an option to either buy or sell a stock?

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Answer to a question on why would an investor buy an option to either buy or sell a stock.

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Why would an investor buy an option to either buy or sell a stock?

The main reason for owning options is leverage. Buying a call option is a bet that a stock will rise above the call option's strike price before the option expires. Buying a put option is a bet that a stock will fall below the put option's strike price before the option expires. Thus the options are considerably more risky than buying a stock outright, because the option expires within months and if the stock doesn't rise (for call option) or fall (for put option) by then, the entire investment is lost. This risk is taken by investors in options ...

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