This primer provides an overview of options and their role in the financial markets.
- Options are contracts that give investors the choice to buy or sell a stock at a specific price within a certain time. Investors use options to manage risk, protect investments, or try to earn profits.
- As a standalone investment, options strategies can limit the risk to an investor but also present unlimited profit and loss potential (depending upon whether the investor is the buyer or seller of the options contract).
- This report explains the fundamentals of options, including the terms and strategies used by investors. It also discusses the regulations that help keep the options market stable and fair. By understanding options, we can understand how these financial tools support investment, manage risk, and contribute to a balanced and healthy U.S. economy.