Financial option refers to a contract that gives its purchaser the right to buy or sell a certain amount of certain financial assets (called basic financial assets, or the underlying assets, such as stocks, foreign currencies, short-term and long-term government bonds, foreign currency futures contracts, stock index futures contracts, etc.). ) within the prescribed time limit, the transaction is made at the price agreed by both parties (hereinafter referred to as the transaction price or exercise price).

For example, after purchasing the "XYZ Stock American Call Option on July 55", investors have the right to buy 65,438+000 XYZ shares from the seller of the option at 55 yuan price at any time before the expiration of the July option. In order to obtain this right, the option buyer has to pay a fee, that is, the option fee, and the option seller has only the obligation because of the option fee.

From the definition, we can see that the option contract actually stipulates a right, which may be the right to buy a financial asset at a set price in the future or the right to sell a financial asset at a set price in the future. In other words, the buyer of the option may be the buyer of the future underlying assets or the seller of the future underlying assets. This should be distinguished from forward or futures: the buyers of forward and futures (bulls) must also be buyers of future underlying assets.

Features: the option contract gives the buyer the right, but it does not give it the corresponding obligation, that is, the option buyer cannot exercise the option; For the seller of rights (-the short position of options), there is only the obligation to sell or buy the underlying assets according to the long position of options, and there is no right. Therefore, in return for the obligations of the option seller, the long position of the option must pay a certain fee to the option seller, which is called option fee or option price.