A contract that permits one party to buy from (or sell to) the other party something at a prespecified price during a prespecified period of time, leaving the choice of whether to do this or not (whether to "exercise" the option) up to the first party, which buys the option. Options exist for many assets, including foreign exchange.

Related Terms

 • Index and Option Market  • Premium margin  • Omega  • Exposure  • Forex Hedge  • margin  • volatility smile  • covered call
 more related terms