One option contract 100 shares is a derivative investment that allows you to buy or sell a specific number of shares of a stock at a predetermined price, called the strike price, within a certain timeframe. Understanding option contracts can help you diversify your investment portfolio and potentially increase your profits.

When you purchase a call option contract, you have the right, but not the obligation, to buy 100 shares of a stock at the strike price. On the other hand, buying a put option contract allows you to sell 100 shares of a stock at the strike price. Depending on your financial goals and market conditions, you can choose either a call or a put option contract.

One of the advantages of option contracts is the ability to leverage your investment. For a fraction of the cost of purchasing 100 shares outright, you can buy an option contract, which gives you control over those shares. This can amplify your gains if the stock price rises, but also increase your losses if the stock price falls.

Option contracts also allow you to hedge against potential losses. For example, if you own 100 shares of a stock that you believe may decrease in value, you can purchase a put option contract to sell those shares at a predetermined price. This can help offset any losses from the decline in value.

However, it`s important to note that options trading is inherently risky and requires careful consideration and analysis. It`s essential to have a clear understanding of the risks associated with option contracts before investing in them.

In summary, one option contract 100 shares is a derivative investment that allows you to buy or sell a specific number of shares of a stock at a predetermined price within a certain timeframe. While option contracts can potentially increase your profits and help you hedge against potential losses, they also come with inherent risks that require careful consideration. As with any investment, it`s important to do your due diligence and consult with a financial advisor before making any decisions.