Options

Keeping your options open - read our cartoon to find out more...

 

Definition:

An option is a tradable asset that gives you the right to buy or sell an asset (known as the underlying) at a certain date in the future at a pre-arranged price, BUT you are NOT obliged to do so. The seller of the option, however, MUST sell if the buyer decides to buy. In return for having the option, the purchaser will pay a fee called a premium.

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Some terms you may want to find more about:

underlying, derivative, asset, premium, call option, put option, strike price, expiration date, hedger/hedging, speculator/speculating, stock exchange, traded options