Skip to Content
Opening Bell
Back to Glossary

Option

Options

An option is a contract that gives its holder the right, but not the obligation, to buy or sell an asset at a set price until (or on) a set date.

The buyer pays a premium for that right; the seller collects the premium and must fulfil the contract if the option is exercised. In the US a standard stock option contract covers 100 shares.

Related Terms

More in the Guide

Options: Calls, Puts and the Anatomy of a PremiumA way to trade direction without owning the stock — and why the clock inside the premium always runs against the buyer.