What are Options

Options trading is a type of financial derivative trading in which traders buy and sell options contracts. An options contract is a financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (known as the strike price) on or before a specified date (known as the expiration date).

There are two types of options: call options and put options. A call option gives the holder the right to buy the underlying asset, while a put option gives the holder the right to sell the underlying asset.

Options trading can be used for a variety of purposes, such as hedging against potential price movements in the underlying asset, speculating on price movements, or generating income through the sale of options contracts.

Options contracts are traded on options exchanges or over-the-counter (OTC), and they are typically bought and sold through brokers. Options trading can be complex and carries a high level of risk due to the leverage that is involved and the potential for significant price movements. It is not suitable for all investors, and traders should have a solid understanding of the market and the risks involved before engaging in options trading.