An option is a financial derivative that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price (strike price) within a predetermined time frame. The two most common types of options are call options and put options. A call option gives the buyer the right to buy the underlying asset at the strike price, while a put option gives the buyer the right to sell the underlying asset at the strike price.
Options can be used for various purposes, such as speculation, hedging, or as a form of insurance against adverse price movements. The price of an option, also known as the premium, is influenced by several factors, including the price of the underlying asset, the time to expiration, the volatility of the underlying asset, and the prevailing interest rates. Options are traded on various financial markets, including stocks, currencies, commodities, and futures.