Option
Also called: call, put, derivative
A contract giving the right to buy or sell something at a set price before a set date.
Two basic kinds. A call is the right to buy at a fixed price; a put is the right to sell at one. Both expire on a date.
The critical difference from owning a share: a share can fall and recover, because the business is still there. An option has a deadline. If the price has not moved your way by then, it expires worthless and the entire amount is gone — not reduced, gone.
That deadline is why options are used for speculation far more often than the textbook uses. They offer large gains from small movements, and equally reliable total losses from small movements the other way. Time is working against the holder every single day.
They do have legitimate uses — hedging an existing position, or generating income from shares you already own. Those are specific tools for specific situations.
If someone is teaching options as a way to grow modest savings quickly, the honest description of that is a bet with an expiry date, and it should be sized like one.
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Covered properly in Learn.
This term appears in the glossary of The Quiet Fortune, Volume I.