An option in which the underlying is the common stock of a company. This option gives the holder (the buyer) the right, without the obligation, to purchase (for a call option) or sell (for a put option) that stock at a set price (strike price/ exercise price), before or by a specified date.

As for the seller of a stock option, buying or selling the underlying stocks is obligatory from/ to the buyer once the latter chooses to exercise his right.

The stock option is also called an equity option.