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An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an asset at an agreed price before a set date. The buyer pays a fee (called a premium) for this right.
The seller receives the premium and takes on an obligation to buy or sell the asset if the buyer chooses to use the option.
Buyers and sellers can use options to try to profit from market movements or manage investment risk. However, options can be complex and risky. While a buyer's loss is generally limited to the premium they paid, a seller can face losses that substantially exceed the premium received, if the market moves against them.