Glossary · Options
Option
A contract giving the right, not obligation, to buy or sell at a set price.
An option is a derivative contract. The buyer pays a premium for the right to buy (call) or sell (put) an underlying asset at a strike price before or at expiration. The seller (writer) collects the premium and takes on the corresponding obligation.
Options can hedge, generate income, or speculate with defined or leveraged risk profiles — but pricing, time decay, and implied volatility make them more complex than shares. Beginners usually start by learning rights vs. obligations before trading live contracts.
Example
You buy a call option that gives you the right to purchase 100 shares at $50 anytime before next month’s expiration. You are not required to exercise if doing so would not help you.