Options are short-term derivative contracts that permit an investor to reduce the risk and afford a better chance to get profit from stock market investments. It is an agreement between a buyer and a seller.
There are two kinds of options viz ‘Calls’ and ‘Puts”. Call Option is the right to buy 100 shares of stock for a determined price during a fixed period of time. By possessing a call option it has the right to buy the stock, but not an obligation. The option holder also has the liberty to do nothing, whereas the Put Option has the right to sell 100 shares of stock for a fixed price in the specified time. The option buyer gives a premium to the seller. For getting the premium, the seller allows specific rights to the buyer thereby accepting the specific obligations. Read more at Options in the Stock Market