Options are contracts that give the owner the right (but they are not required) to buy or sell an underlying asset (like a stock, ETF, etc.) at a fixed price for a specific period of time. There are two standard types of option contracts: a call and a put. Option contracts are for a specific amount of time. The price of the option is dependent upon the underlying asset or security.
A call option is a contract that gives the investor the right to buy the stock the is related to the option at a later date for a certain price, while a put option allows the investor to sell that particular stock.
The underlying concept is that if you purchase a call option you think the stock will increase in value and you can buy the stock at the lower contract price at a later date and make a profit. The problem is if the stock does not increase then the investor runs the risk of losing the full amount of his/her investment.
