What Is Option? Meaning & Example
Definition
An option is a contract giving the buyer the right, but not the obligation, to buy or sell an asset at a set price before or on a certain date. Options can be used for income, hedging or speculation.
Related terms
A call option gives the buyer the right to buy an asset at the strike price before expiration. Buyers profit if the price rises enough above the strike to cover the premium paid.
Put OptionA put option gives the buyer the right to sell an asset at the strike price before expiration. Puts can be used to profit from declines or to protect existing holdings.
Strike PriceThe strike price is the set price at which an option holder can buy (call) or sell (put) the underlying asset. It determines whether an option has intrinsic value.
What is Option?
An option is a contract giving the buyer the right, but not the obligation, to buy or sell an asset at a set price before or on a certain date. Options can be used for income, hedging or speculation.
Can you give an example of Option?
One stock option contract usually covers 100 shares of the underlying stock.