What Are Options?
An Option is a contract between the buyer (also called the holder), and the seller (also called the writer or grantor).
The contract gives the buyer the right to buy or sell an asset, the underlying stock or index in the case of equity options, to the option seller if they so choose, at a specified price (called the strike price) within a specified period of time (called the term).
The buyer purchases the right but not the obligation from the seller for a price. This price is called the option premium.,/p>
The premium is the incentive the seller keeps in order to take on the obligation of buying or selling the asset at the strike price if the buyer chooses to exercise their right.
There are two types of options. Call Options give buyers the right to buy, and Put Options give buyers the right to sell.
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