option

In business, a contract giving the owner the right (as opposed to the obligation, as with futures contracts; see futures trading) to buy or sell a specific quantity of a particular commodity or currency at a future date and at an agreed price, in return for a premium. A right to purchase is known as a call, and a right to sell is known as a put. The price to be paid is called the strike, or the exercise price, and the date by which the option must be used is called the expiry date. The buyer can decide not to exercise the option if it would prove disadvantageous, but in this case would lose the premium paid. Equities and commodities, such as gold, are common assets for which options are issued.

Traded options were introduced to London 1978 and enable options in selected companies to be traded. Company directors are forbidden by law from trading in options on shares of their own company.