option contract

option contract
A unilateral contract giving the buyer the right, but not the obligation, to buy or sell a commodity, or a futures contract, at a specified price within a certain time period. It is unilateral because only one party (the buyer) has the right to demand performance on the contract. If the buyer exercises his right, the seller (writer or grantor) must fulfill his obligation at the strike price, regardless of the current market price of the asset. The CENTER ONLINE Futures Glossary
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A contract that gives the bearer the right, but not the obligation, to be long or short a futures contract at a specified price within a specified time period. The specified price is called the strike price. The futures contract that the long may establish by exercising the option is referred to as the underlying futures contract. Chicago Mercantile Exchange Glossary

Financial and business terms. 2012.

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Look at other dictionaries:

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  • Option contract —   The right but not the obligation to buy or sell a specific quantity of an underlying instrument on or before a specific date in the future …   International financial encyclopaedia

  • option contract — / ɒpʃən ˌkɒntrækt/ noun a right to buy or sell shares at a fixed price …   Dictionary of banking and finance

  • option — op·tion 1 / äp shən/ n 1: the power or right to choose; also: a choice made or available 2: a privilege of demanding fulfillment of a contract on any day within a specified time 3: a contract conveying in exchange for the payment of a premium a… …   Law dictionary

  • contract — con·tract 1 / kän ˌtrakt/ n [Latin contractus from contrahere to draw together, enter into (a relationship or agreement), from com with, together + trahere to draw] 1: an agreement between two or more parties that creates in each party a duty to… …   Law dictionary

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  • option — an agreement, often for a consideration, which permits the purchase or sale of something within a stipulated time, in accordance with the terms of the agreement. For example, a right by a tenant to take up a further lease of premises, usually… …   Financial and business terms

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