What is an option?

What is an option?

Options confer the right (but not the obligation) to act within a period of time, usually to buy or sell something at a fixed price. In the market, options are traded for stocks, bonds, and futures.
A "call" is an option to buy. A "put" is an option to sell. The price at which the underlying asset can be bought or sold is called the "exercise" price, the "strike price, " or just the "strike." The expiration date is the last day on which the option can be exercised. The "premium" is the price paid for the option.
Puts and calls are sold in lots of 100. A quote of $2.50 for a March Q call with a strike price of 60 means that you will pay $250 for the right to buy 100 shares of Q for $60, good until the end of the expiration date in March.
Options, like futures, are used to lock in prices for a period. Short term investors trade them for capital gains. When you buy or sell an option, you are guessing not only the direction of a price movement but also the time in which it will happen. Compared to just buying and selling the underlying asset, this is like moving from two to three dimensional chess. Option trading strategies are complex and, for some people, very interesting.а Prices are volatile; money can be made or lost quickly.
In general, unless you are strongly attracted to the challenges posed by options and have a fair amount of time as well as money to invest, you should leave option trading to others.