What Is an Option Contract?

An option contract is a type of derivative financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price, known as the strike price, within a certain period or at a specific expiration date. There are two types of option contracts: call options and put options. Call options give the holder the right to buy the underlying asset, while put options give the holder the right to sell the underlying asset.

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