Options - What Is An Option & What Is The Difference Between A Put Option & A Call Option?

An option is a contract between two parties when one party has the right (it is a right not an obligation so it does not have to be carried out) to exercise their option before or on a certain date. The other party to the contract who is known as the seller or writer of the option has the obligation to carry out the option if requested.

So what is a put option and a call option exactly? Well a put option is the right for the purchaser of the put option to sell an asset and a call option gives the purchaser of the call option the right to buy an asset.

There are different kinds of options including real options, traded options, vanilla options and employee stock options.