The right but not the obligation to buy (a\u00a0call\u00a0option) or sell (a\u00a0put\u00a0option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time. Each option has a buyer (the holder) and a seller (the writer). When an option contract is exercised, the writer is responsible for fulfilling the terms of the contract by delivering the shares to the appropriate party. If a security cannot be delivered, for example an index, the contract is settled in cash. When an option is not exercised, it expires. No shares change hands and the money spent to purchase the option is lost. Options are often used as either leverage or protection. As leverage, options allow the holder to control equity in a limited capacity for a fraction of what the shares would normally cost. The difference can be invested elsewhere until the option is exercised. As protection, options can guard against price fluctuations in the near term because they provide the right to buy the underlying stock at a fixed price for a limited time.<\/p>\n","protected":false},"excerpt":{"rendered":"
The right but not the obligation to buy (a\u00a0call\u00a0option) or sell (a\u00a0put\u00a0option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time. Each option has a buyer (the holder) and a seller (the writer). When an option contract is exercised, the writer is responsible for fulfilling the terms of the contract by delivering the shares to the appropriate party. If a security cannot be delivered, for example an index, the contract is settled in cash. When an option is not exercised, it expires. No shares change hands and the money spent to purchase the option is lost. Options are often used as either leverage or protection. As leverage, options allow the holder to control equity in a limited capacity for a fraction of what the shares would normally cost. The difference can be invested elsewhere until the option is exercised. As protection, options can guard against price fluctuations in the near term because they provide the right to buy the underlying stock at a fixed price for a limited time.<\/p>\n","protected":false},"featured_media":0,"parent":0,"template":"","meta":{"_acf_changed":false,"footnotes":""},"traders-glossary":[13269,13251],"class_list":["post-180260","glossary-terms","type-glossary-terms","status-publish","traders-glossary-trading-terms-s","traders-glossary-trading-alphabet"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\n