What is options?

An option is a contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a fixed price on or before a certain date. If, over the life of the contract, the asset value decreases, the buyer can simply elect not to exercise his/her right to buy/sell the asset. There are two types of option contracts – Call options and Put options. A Call option gives the buyer the right to buy the underlying asset, while a Put option gives the buyer the right to sell the underlying asset.