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Option contract
A contract negotiated over the counter or an exchange-traded contract that gives the holder the right, but not the obligation, to purchase (call option) or sell (put option) a fixed quantity of an underlying, for example a financial asset, an index, a commodity or a futures, at a predetermined exercise price, at a specified future date or dates or at any time before its maturity.
(1) The option writer is bound by the holder's decision to exercise the option or not. The writer commits to buying or selling the underlying only if the holder chooses to exercise the option. Unlike a futures contract, in the case of an option the holder does not commit to buying or selling the underlying.
(2) Option contracts can be distinguished on the basis of their underlying, for example stock options, foreign currency options, index options, commodity options, interest rate options and credit spread options.
Translations
Synonyms and variations
- Option
- Options contract