In the context of stock options, what does it mean for holders to have a right to buy shares?

Holders of stock options have the right to buy shares at a specified price, often referred to as the exercise or strike price. This means that these options give the holder the opportunity to purchase shares of the underlying stock at that predetermined price regardless of the current market price. This can be advantageous for the holder if the market price of the stock rises above the strike price, allowing them to acquire shares at a lower cost and potentially profit from the difference when they sell the shares at market value. This feature of stock options is what distinguishes them from other forms of equity or shares, as it provides a potential for profit based on the future performance of the stock.

Other choices do not accurately reflect how stock options function. For instance, the idea that holders can buy shares at any price or only at the current market price does not capture the essence of the predefined nature of the options. Additionally, stock options do not impose an obligation on the holder to purchase shares, which rules out the concept of a mandatory purchase.