Options Contracts

An options contract is a financial agreement that gives the buyer the right, but not the obligation, to buy or sell an asset—like stocks—at a specific price within a certain time frame. There are two types: a call option (buy) and a put option (sell). Investors use options to hedge against risk or speculate on price movements. The seller of the option earns a premium for taking on the potential obligation. Options are versatile tools that can enhance investment strategies but also involve risks if not managed carefully.