Option

The right, but not the obligation, to buy or sell shares at a certain price (strike price). A call option gives the holder the right to buy shares from the counter-party. This type of option was known as a ‘refuse’ in the eighteenth century. A put option gives the holder the right to sell shares to a counter-party. Contracts specify that the option can be exercised during some future period (American option) or on a specific date (European option).