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Importance of an Option ContractThey should always be in writing because at their most basic form they are the promise of one party to take an agreed upon action in the future, and over time, misunderstandings can arise as the original terms and intent of the agreement.
Option Contract ExampleYou expect Company XYZ's stock price to go up to $90 within the next month. You find out that you can buy an option contract for this company at $4.50 with a strike price of $75 per share. That means you'll pay $450 for your options contract ($4.50 x 100 shares).
Option Account Agreement must be received by member firm within 15 calendar days from time the account is approved.
An options contract offers the buyer the opportunity to buy or selldepending on the type of contract they holdthe underlying asset. Unlike futures, the holder is not required to buy or sell the asset if they decide against it.
Options are derivatives of financial securitiestheir value depends on the price of some other asset. Examples of derivatives include calls, puts, futures, forwards, swaps, and mortgage-backed securities, among others.