Options Contract

By creating a contractual agreement between two parties, an options contract, which falls under the category of derivative agreements, allows for the potential execution of a transaction involving a specific underlying security at a predetermined price (strike price) within a specified timeframe until the contract’s expiration date. Options contracts are commonly categorized as either put options or call options. Put options are acquired to speculate on potential price declines or for hedging purposes, while call options are purchased to speculate on price increases or for generating income.