Options Trading Tutorial

What's the difference between stock options and restricted stocks?

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1. Stock options allow you to buy a stock at some specified future date (or later, prior to expiration), at some currently locked-in price. Your profit is the difference between the option price and the actual market price. If the market price is lower than the option price, the options are worthless. Restricted stock is stock that you own, but can only sell when certain restrictions are met. Usually, that restriction is that you have to hold the stock for a certain period of time before selling.
2. With restricted stocks, you actually own the stock...You are limited, until the restrictions come off, in disposal of the stock. But you are a shareholder and have all the rights of a shareholder. And the stock will have value, unless the company goes belly up. Options are the right to buy the shares at a certain price. You do not have any other shareholder rights. In addition, when the market price is below your strike price, it's worthless. Plus there's a time-limit on when the options are good usually 10 years.
3. an option only gives you the OPTION to purchase...with an option, you own only the right but not the obligation to purchase something.