Options & derivatives
Option (derivative)
An option is a contract giving the right, but not the obligation, to buy or sell an asset at a set price, before a given date.
An option is a contract giving the right, but not the obligation, to buy or sell an asset at a set price, before a given date.
An option derives its value from an underlying asset (a stock, for example). It lets you bet on a direction with a limited outlay, or hedge. It is a powerful but complex product, to approach only after the basics.
You buy an option giving you the right to buy a stock at $50 for one month.
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