Option

What does it mean?
A privilege sold by one party to another that offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date.

In Other Words...
Options are extremely versatile securities that can be used in many different ways. Traders use options to speculate, which is a relatively risky practice, while hedgers use options to reduce the risk of holding an asset.

Related Links
Options Basics Tutorial - An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them.

Related Terms
American Option | Call | Derivative | Embedded Option | Employee Stock Option (ESO) | European Option | Index Option | Intrinsic Value | LEAPS | Leverage | Max Pain | Option Chain | Options Contract | Put | Spread | Strike Price | Time Value | Writer

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