Option contracts are agreements between two parties that give one party the right, but not the obligation, to buy or sell an underlying asset at a pre-determined price within a specified period of time. Option contracts can be used as a hedging strategy to reduce risk and increase flexibility in complex financial transactions. They provide a way to lock in a certain price when market conditions are uncertain. By granting the ability to buy or sell an asset without any upfront costs or obligations, option contracts can be a great tool for companies looking to maximize returns or minimize losses.