What is an option?

An option is a type of contract which gives the purchaser the right to buy or sell an underlying security (stocks, currencies, bonds, commodities, futures, and indexes) at an agreed upon price within a specified time period. On the eToro Options app, options contracts are normally based on stocks or Exchange Traded Funds (ETFs) as the underlying security.

What is a Call Option?

Call options are financial contracts that give the option buyer the right, but not the obligation, to buy the underlying security at a specified price within a specific time period. A call buyer profits when the underlying security increases in price.

What is a Put Option?

A put option is a contract giving the owner the right, but not the obligation, to sell–or sell short–a specified amount of an underlying security at a pre-determined price within a specified time frame. This pre-determined price that buyer of the put option can sell at is called the strike price.

A put option is the opposite of a call option, which gives the holder the right to buy the underlying security at a specified price, either on or before the expiration date of the options contract.