Gives the buyer the right, but not the obligation, to
buy or sell an
asset at a set
price on or before a given date.
Investors, not companies,
issue options. Investors who purchase
call options bet the
stock will be worth more than the price set by the
option (the
strike price ), plus the price they paid for the option itself. Buyers of
put options bet the stock's price will go down below the price set by the option. An option is part of a
class of securities called
derivatives , so named because these securities derive their value from the worth of an
underlying investment.