Options

Definition of Options as it relates to Finance, Private Equity

Options in the context of Finance and Private Equity refer to a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price prior to or on a specified date, depending on the form of the option. This enables the holder to potentially benefit from price movements while limiting their risk. Options can be categorized as calls, giving the right to buy, or puts, granting the right to sell. They are traded over-the-counter or on exchanges and serve various purposes, such as hedging, speculation, and income generation.

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