An option is a type of contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a given price within a specified period of time. Options give the holder more flexibility than other forms of trading, allowing them to profit from both upswings and downswings in the market. They are typically used as hedges against volatile investments and can provide a source of income when combined with options strategies like writing covered calls. Knowing how to effectively use options is key to any successful investor’s portfolio.
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