What is options trading?

An option is a financial instrument that you can buy and sell with the goal of generating other income on stocks you already own or to speculate on stock price movements.

There are two basic types of options: calls and puts.

A call option contract gives the owner the right (but not the obligation) to buy a specified amount of an underlying security, typically 100 shares per contract, at a specified price within a specified time.

A put option contract gives the owner the right, but not the obligation, to sell a specified amount of an underlying security, typically 100 shares per contract, at a set price within a specified time. The buyer of a put option estimates that the value of the underlying asset will drop below the exercise price before the expiration date.

Please note: Options involve risk and are not suitable for all investors. Before investing in options, please read the Characteristics and Risks of Standardized Options.