Final answer:
A stock option allows buying or selling stocks at a predetermined price for a period, carrying significant risks due to short-term return fluctuations but offering high liquidity.
Step-by-step explanation:
A stock option gives you the opportunity to purchase or sell stocks at a set price for a set period of time and can be a very risky investment. The high returns of stock market investments refer to the potential for a high average return over several years or decades.
However, these investments carry high risk due to the fact that, in the short term, the rate of return can fluctuate significantly. The liquidity of stocks is high because stocks in publicly held companies can be readily sold for spendable money.
When considering investments, one must weigh the tradeoffs between risk and return, especially relative to the investor's stage in life and financial goals.