In finance, options are securities that convey the right, but not the obligation, to engage in a future transaction on some underlying security. For example, a call option provides the right to buy some amount of a security at a set strike price at some time on or before expiration, while a put option provides the right to sell. Upon the option holder's choice to exercise the option, the party that sold, or wrote, the option must fulfill the terms of the contract.
An option on a futures contract is the right, but not the obligation, to buy or sell a particular futures contract at a specific price on or before a certain expiration date. There are two types of options: call options and put options. Each offers an opportunity to take advantage of futures price moves without actually having a futures position.
See also[]
- Naked Short Selling (options)
- Put option
- Call option
- Binary option