Option trading is a financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a certain date. There are two types of options: call options and put options.
Call options give the holder the right to buy the underlying asset at a predetermined price, while put options give the holder the right to sell the underlying asset at a predetermined price. The predetermined price is known as the strike price, and the date on or before which the option can be exercised is known as the expiration date.
Option trading can be used as a hedge against losses in other investments, as a way to generate income, or as a speculative investment in its own right. However, option trading carries a high level of risk and may not be suitable for all investors. It is important to fully understand the risks and mechanics of options before trading them.
