Options are financial contracts that give investors the right, but not the obligation, to buy or sell an underlying asset, such as stocks, at a predetermined price within a specific time period. There are two main types: call options, which give the right to buy, and put options, which give the right to sell.
Unlike futures contracts, which require execution at expiration, options provide flexibility, allowing the holder to decide whether or not to exercise the contract.
Options are commonly used for hedging risk, generating income, or speculating on market movements, and their value depends on factors like the asset’s price, time remaining, and volatility.