Options are financial instruments that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a certain time period. 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 specified price, known as the strike price, within a certain time period. For example, if you own a call option on a stock with a strike price of $50 and the stock is currently trading at $60, you have the right to buy the stock at $50 even though it is worth more in the market.

A put option gives the holder the right to sell the underlying asset at a specified price within a certain time period. For example, if you own a put option on a stock with a strike price of $50 and the stock is currently trading at $40, you have the right to sell the stock at $50 even though it is worth less in the market.

There are many different types of options that exist, including:

American options: These options can be exercised at any time before the expiration date.

European options: These options can only be exercised at the expiration date.

Exotic options: These are options that have more complex features than standard options, such as barriers or multiple expiration dates.

Options are often used as a form of risk management or as a way to speculate on the future movement of an asset. They can be traded on exchanges or over-the-counter (OTC) and are a popular financial instrument for both retail and institutional investors.