What is the term for the basic unit of trading for stocks?

• A. Contract
• B. Share
• C. Bond
• D. Option

Answer: (B)

The basic unit of trading for stocks is referred to as a "share." A share represents a unit of ownership in a company, and when investors buy shares, they are essentially purchasing a piece of that company. The value of shares fluctuates in the market based on supply and demand, and owning shares entitles shareholders to potential dividends and voting rights in certain corporate matters.

Understanding that shares are the fundamental building blocks of stock trading is crucial for anyone engaged in the financial markets, as they indicate not just ownership, but also the potential for profit and loss associated with the company’s performance. This concept is vital in distinguishing between different types of financial instruments, particularly in the context of equity markets.

In contrast, contracts, bonds, and options represent different financial instruments and concepts; contracts often refer to agreements in various types of trades, bonds are debt securities representing loans to an entity, and options are financial derivatives that provide the right, but not the obligation, to buy or sell an underlying asset at a predetermined price before a certain date.