An Options contract gives its buyer the right, but not the obligation, to buy or sell an underlying asset at a fixed price, by (or on) a certain date. The buyer pays an upfront amount called a “premium” for this right, and can simply choose not to exercise it if it turns out to be unfavorable.
Options vs Futures
Unlike a Futures contract, which obligates both sides, an Options contract gives the buyer flexibility — at the cost of the premium paid upfront. We cover Options in full detail starting in Module 5 of the Academy.
Related Reading
See the introductory comparison in What Are Derivatives? Futures and Options Explained Simply.