Option Contracts
An option contract is a financial agreement that gives a buyer the right, but not the obligation, to buy or sell an asset at a predetermined price within a specific timeframe. There are two main types: a "call option" allows buying, while a "put option" allows selling. Investors use options to hedge risks or speculate on price movements. For example, if you think a stock will rise, you might buy a call option to lock in a lower price, allowing you to profit later if the stock indeed rises. Options can be complex and involve risks, so understanding them is crucial before trading.
Additional Insights
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Option contracts are financial agreements that give one party the right, but not the obligation, to buy or sell an asset (like stocks) at a predetermined price within a specific timeframe. There are two main types: a "call option" allows the buyer to purchase the asset, while a "put option" allows them to sell it. Investors use options to speculate on price movements or to hedge against potential losses. Essentially, options provide flexibility and leverage, allowing investors to manage risk or profit from market changes without directly owning the underlying asset.