| A contract that gives the owner (buyer) the right, but not the obligation, to buy or sell a particular asset (the underlying security, i.e. stock or index) at a fixed price (the strike price) for a specific period of time (until it expires). The contract also obligates the writer (seller) to meet the terms of delivery of the asset if the contract right is exercised by the owner. The amount the buyer pays the seller for the option is called the option premium. |
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