In finance, an option is a contract that gives the holder the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date). Options are a type of derivative product that allow investors to speculate on or hedge against the volatility of an underlying stock. They are divided into two types: call options and put options. Call options allow buyers to profit if the price of the stock increases, while put options allow buyers to profit if the price of the stock declines.

Options are versatile financial products that can be used as a source of leverage and risk hedging. They can be traded between private parties in over-the-counter transactions or exchange-traded in live, public markets in the form of standardized contracts). Options are part of a larger class of financial instruments known as derivative products, or simply, derivatives).

When buying or selling an option, there are several key terms to understand:

• Premium: The purchase price of an option, paid by the buyer to the seller.

• Strike Price: The price at which the underlying asset can be bought or sold.

• Expiration Date: The date on which the option contract expires.

• Underlying Asset: The asset on which the option is based, such as a stock, index, or ETF.

Options can be a useful tool for investors to manage risk, generate income, and speculate about the future direction of markets. However, it is important to understand that there are risks, costs, and trade-offs along with the potential benefits offered by any options strategy. To trade options, investors need a brokerage account that is approved for options trading, and the types of options trades that can be placed depend on the investors specific options approval level.