Part 2 Master Candle Patterns What Are Options?
Options are derivative instruments, meaning their value is derived from an underlying asset—usually stocks, indices, commodities, or currencies. An option gives the buyer the right, but not the obligation, to buy or sell the underlying asset at a predetermined price before or on a specific date.
There are two types of options:
1. Call Option
A call option gives the buyer the right to buy an asset at a fixed price (known as the strike price) within a certain time (before expiry).
Traders buy call options when they expect the price to rise.
2. Put Option
A put option gives the buyer the right to sell the asset at a fixed price before expiry.
Traders buy put options when they expect the price to fall.
