Options contract definition
Options contract
Options contracts give you the right but not the obligation to buy or sell an asset on a fixed expiry date at set price, known as the strike price.
Options contracts are used to trade forex, stocks, commodities, and real estate agreements.
The two types of options contracts are:
- Call options: an agreement to buy an asset
- Put options: an agreement to sell an asset
Both can be purchased to speculate on the market direction or generate income.
How many options are in a contract?
In an options contract, the amount of the underlying asset being traded will vary from market to market.
For stock options, a single contract typically covers 100 shares of the underlying stock. For oil options, the underlying is traded in lots of 1000 barrels (42000 gallons). And for FX options, an options contract is worth 10,000 units of the underlying currency.