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Both options and stocks can deliver quick profits amid substantial risk. Beyond that, these two trading instruments work very differently. Those differences affect your profit potential, loss exposure, and the skills you need to trade successfully. Here's what you need to know.
Option contracts are sold by option writers (sellers) to option holders (buyers). The price paid for the contract is called the premium. The contract itself gives the holder the right to buy or sell an underlying security at a stated price within a defined time frame. If the holder chooses to proceed with the transaction, called exercising the option, the writer must fulfill it.
Stock trading involves actively buying and selling ownership shares in a company. Once a stock trade is complete, the buyer and seller in the transaction have no further obligation to one another.
The table below outlines how stock trading differs from options trading in terms of ownership rights, capital required, risk, time horizon, and income potential.

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