Glossary

An option is a financial contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (called the strike price) on or before a specific date (called the expiration date).

Options come in two types: call options, which give the holder the right to buy, and put options, which give the holder the right to sell. Options are used for various purposes, such as hedging risk, generating income, or speculating on price movements. 📈📉

For example, if an investor purchases a call option for a stock with a strike price of $50 and the stock's price later rises to $60, the investor can exercise the option to buy the stock at $50 and sell it at the higher market price, making a profit.

Fun fact: The Chicago Board Options Exchange (CBOE), established in 1973, was the first marketplace for trading standardised options contracts. Today, the CBOE is one of the largest options exchanges in the world. 🏢