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You invest $5,000 in Yahoo! common stockand just months later sell the shares for $7,500, realizing a 50 percent return. Not bad! At the same time, your neighbor invests $5,000 in Yahoo! stock options, which are worth $25,000 at expiration—a 400 percent return. Yahoo! Alternatively, your Yahoo! shares fall in value to $2,500, and you realize a 50 percent loss. Too bad! But at the same time your neighbor's Yahoo! stock options are now worthless. Clearly, there is a big difference between stock shares and stock options. Security type matters.
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