In finance, an option is a contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specified time frame. The underlying asset can be a stock, commodity, currency, or any other financial instrument. There are two types of options: call options and put options.

A call option gives the holder the right to buy the underlying asset at a predetermined price, called the strike price, while a put option gives the holder the right to sell the underlying asset at the strike price. The holder of an option pays a premium to the option seller, also known as the writer, for the right to exercise the option. If the holder decides to exercise the option, the writer is obligated to sell or buy the underlying asset at the strike price.

Options are commonly used in investment and trading strategies to speculate on the future price movements of the underlying asset. They can also be used for hedging, which is a strategy to reduce the risk of adverse price movements in an investment portfolio. However, options trading can be complex and carries a high level of risk, so it's important to thoroughly understand the potential risks and rewards before investing.
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