An options contract is a financial agreement between two parties that grants the buyer the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price (strike price) on or before a specific date (expiration date). The buyer of the options contract pays a premium to the seller for this right. Options contracts are commonly used as derivatives, allowing investors to speculate on the price movements of assets without directly owning them. Options provide flexibility and potential for profit or hedging strategies, depending on market conditions and the investor’s objectives.
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