Written by: Sophie May
A stock is a share in the ownership of a company, representing a claim on the company’s assets and earnings. In traditional vanilla options, it is a contract between a buyer and a seller that gives the buyer the right to buy or to sell a particular asset on or before the option’s expiration time, at an agreed price which is referred to as the strike price. Most stocks are traded at exchanges, where buyers and sellers meet and decide on a price, either at a physical location on a trading floor, or via a network of computers where trades are made electronically.
Although shareholders may make handsome profits if a company is successful, they also risk losing the whole investment if the company performs poorly. Gains and losses are proportionate to the value of the stock. Contracts are typically held for a long time, even though it can be hard to predict the long-term health of a business, due to the number of internal company factors and external economic influences. This is a key reason for the growth of binary option stock trading, with its predefined profits and loses, as well as short-term contracts.
Traders can buy or sell stocks for a wide range of public companies. These include banks such as Goldman Sachs and Barclays and chain stores such as Tesco, alongside the world’s most recognizable brands from a range of industries, including Coca-Cola, Disney and Apple. Public companies are required to report their earnings once a quarter, which are perhaps the most important figures available for analysts judging the value of a particular stock.