What Are Options?

An options contract is an agreement between buyer and seller to facilitate a potential transaction on asset the underlying (such as stocks, futures, ETF’s etc.) at a preset price, referred to as the strike price, prior to the expiration date.

The two types of contracts are call and put options, both of which can be –

• purchased to speculate on the direction of stocks

OR

sold to generate income.

For stock options, a single contract covers 100 shares of the underlying stock.