An option refers to a contract, originating from the American and European markets in the late eighteenth century, that gives the holder the right to buy or sell an asset at a fixed price on a specific date or at any time before that date.

right.

The key points of the definition of options are as follows: 1. An option is a right.

Options contracts involve at least two parties: a buyer and a seller.

The holder enjoys rights but does not assume corresponding obligations.

2. The subject matter of the option.

The underlying of an option is the asset chosen to be purchased or sold.

It includes stocks, government bonds, currencies, stock indexes, commodity futures, and more.

Options are "derivatives" of these underlying assets, so they are called derivative financial instruments.

It is important to note that the option writer does not necessarily own the underlying asset.

Options can be "sold short."

Options buyers may not actually want to purchase the underlying asset.

Therefore, when the option expires, both parties do not necessarily make physical delivery of the underlying asset, but only need to make up the price based on the price difference.

3. Expiration date.

The day on which the option expires as agreed upon by both parties is called the "expiration date". If the option can only be exercised on the expiration date, it is called a European option; if the option can be exercised on the expiration date or at any time before the expiration date, it is called a European option.

If executed, it is called an American option.

4. Execution of options.

The act of buying or selling the underlying asset based on an options contract is called "execution."

The fixed price agreed in the option contract at which the option holder purchases or sells the underlying asset is called the "strike price".

Extended information: Risks of options In options trading, the rights and obligations of buyers and sellers are different, which makes buyers and sellers face different risk situations.

For option traders, both the buyer and seller positions face the risk of adverse changes in premium.

This is the same as futures, that is, within the scope of the premium, if you buy low and sell high, you can make a profit by closing the position.

On the contrary, you will lose money.

Different from futures, the risk bottom line of long options has been determined and paid, and its risk is controlled within the scope of the premium.

The risk of a short option position is subject to the same uncertainty as a futures position.

Since the premium received by the option seller can provide corresponding guarantee, it can offset part of the loss of the option seller when the price changes adversely.

Although the risk of the option buyer is limited, the loss ratio may be 100%, and the limited losses add up to a larger loss.

The option seller can receive a premium. Once the price changes significantly or the volatility increases significantly, although the price of futures cannot fall to zero or rise indefinitely, from the perspective of capital management, for many

For traders, the losses at this time are equivalent to "infinite".

Therefore, before investing in options, investors must fully and objectively understand the risks of options trading.