What is Option?
A contract that gives the right, but not the obligation, to buy or sell a certain asset (for example, a share) at a price agreed in advance, by a set date. An option giving the right to buy is called a call option, and one giving the right to sell is called a put option. The agreed price is called the strike price, and the fee paid for the right is called the premium. The holder of the option has a right, while the writer (seller) has an obligation: if the holder exercises the right, the writer must perform the contract. The holder's maximum loss is limited to the premium paid, so options are often used to protect against price changes or to profit from a price rise.