What are options contracts?

All you need to know about options contracts. What Is an Options Contract? An options contract is a financial contract that gives the buyer the right, but not the obligation, to buy or sell a specific quantity of an asset at a specific price on or before a specific date.

What are options & how do they work?

Using options is a form of leverage, allowing an investor to make a bet on a stock without having to purchase or sell the shares outright. In exchange for this privilege, the options buyer pays a premium to the party selling the option. There are two types of options contract: puts and calls.

What happens if an options contract expires?

Every options contract will have a specific expiration date. That means the value of the contract relies heavily on the date. You can choose to buy, sell or exercise the contract within this timeframe. However, when an options contract expires, the contract is no longer valid.

Is an options contract a derivatives security?

Yes, an options contract is a derivatives security, which is a type of asset. Options are a type of derivative product that allow investors to speculate on or hedge against the volatility of an underlying stock.