OPTION

Right to buy or sell property that is granted in exchange for an agreed-upon sum. If the right is not exercised after a specified period, the option expires and the buyer loses the premium paid. Options are securities transaction agreements on stocks, commodities, probabilities, indices. Because a small amount of money is required to open a position in the option market, leverage is relevant and provides great profits to (successfull) investors.

Option call: it gives the right to buy a predefined quantity of the underlying security at a fixed price before a specified date in the future (usually 1,3,6,9 months). For this right, the option call buyer pays a fee to the option call seller (premium). The buyer speculates that the price of the underlying security will rise before expiration date.

Option put: it gives the right to sell a predefined quantity of the underlying security at a fixed price before a specified date in the future (usually 1,3,6,9 months). The buyer speculates that the price of the underlying will fall before the expiration date.