InsiderFlow › Glossary › What is an option?
An option is a contract giving the right (not the obligation) to buy or sell a security at a preset price within a deadline.
Call options grant the right to buy, puts the right to sell, at a price called the "strike". For this right you pay a premium. They're leveraged instruments: with a few dollars you control the equivalent of many shares, and you can lose 100% of the premium in days.
Legitimate uses: insuring a portfolio (protective puts), generating income (covered calls). Most common retail use: high-leverage speculation, where the vast majority lose. The US options market moves more notional value than the stock market itself.
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No: the combination of leverage, expiry dates and volatility makes them among the hardest instruments of all.
The price never reached the strike: the option is worth zero and the premium is lost.