Option Contract | Practical Law

Option Contract | Practical Law

Option Contract

Option Contract

Practical Law Glossary Item 2-382-3659 (Approx. 3 pages)

Glossary

Option Contract

A contract giving the holder the right, but not the obligation, to purchase or sell a specific asset at a certain price (often at a certain future date). There are different kinds of options, including Bermuda, American and European (see Practice Note, Derivatives: Overview (US): Types of Options). Options are also either put options or call options.
Options sold in the stock market are securities of a company giving the holder (an investor) the right to buy (also referred to as a call or call option) or sell (also referred to as a put or put option) a security of that company at a certain price for a limited period of time.
For an explanation of options generally, see Practice Note, Derivatives: Overview (US): Options. For details on equity options, see Practice Note, Equity Derivatives: Overview (US): Equity Options.