A call option gives you the right (but not the obligation) to buy a stock at a specific price (the strike price) before a specific date (the expiration). A put option gives you the right to sell at the strike price. You pay a premium for this right.
If you buy a call with a $50 strike and the stock rises to $60, your option is worth at least $10 per share (the intrinsic value). If the stock stays below $50, the option expires worthless and you lose only the premium paid.
Options can be used for speculation (leveraged bets on price direction), hedging (protecting existing positions), or income generation (selling covered calls). The leverage means small price moves can create large percentage gains or losses.
Buying options has limited risk (you can only lose the premium) but selling naked options has theoretically unlimited risk. Options are complex instruments with many moving parts including time decay, implied volatility, and the Greeks (delta, gamma, theta, vega).
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