An option is a contract that entitles the buyer to buy (call) or sell (put) a predetermined quantity (usually 100 shares) of an underlying security for a specific period of time at a pre-established price. It is called a derivative investment, since the value of the option is derived from the price of the underlying security.
Disclosures
Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Firstrade does not guarantee favorable investment outcomes, and there is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing. To learn more about the risks associated with options, please read the Characteristics and Risks of Standardized Options before you begin trading options.