Options are derivatives that give the holder the right, but not the obligation, to buy or sell an asset at a predetermined price before or at a specified expiration date.
Options come in two main types:
Call Options → The right to buy an asset at a specified price.
Put Options → The right to sell an asset at a specified price.
Every option contract has:
A strike price (the agreed-upon price for the transaction).
An expiration date (when the option expires).
A premium (the upfront cost paid by the option buyer).
In-the-Money (ITM) → The option has intrinsic value (e.g., a call option with a strike price below the current market price).
At-the-Money (ATM) → The strike price is equal to the current market price.
Out-of-the-Money (OTM) → The option has no intrinsic value (e.g., a call option with a strike price above the current market price).
✅ Earn Yield: Selling options generates upfront premiums as income. ✅ Strategic Exposure: Traders can take positions on price movements without directly buying or selling assets.
Options are widely used in traditional finance and DeFi for yield generation, hedging, and capital efficiency.