Stock option Question
 

I'm an investment noob. I've been researching/googling what stock options are but I'm not sure if I understand this correctly.

Here's from what I understand.

If you think a certain stock will go up, you will put a call option that has an expiration date.

For example

Stock A has a market price of $40

If you buy an option, you are basically buying the stock at a premium price, lets say... at $10 instead of buying at the full $40. Also the strike price is $50.

Now if the price stock doesn't hit $50 by the time of expiration, you lose all the money you invested in the stock when you bought it at $10.

So essentially if Stock A hits $50 before expiration, you basically bought the stock at $10 when now it's worth $50. Since then the contract is fulfilled

Am I understanding this correctly?

Also another question. Do you automatically get the stock at the premium price once it hits $50, or does it have to stay above $50 when the expiration... expires?

Also what determines the price of the premium, expiration and strike price?

Thanks,
Barrin6

Re: Stock option Question