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Option Contract

Definition - What does Option Contract mean?

An option contract is a contract that gives the purchaser the right to buy or sell certain things at a certain price at a certain time in the future.

Option contracts have to be agreed on by both the buyer and the seller. In the context of the law, option contracts are legally binding.

Justipedia explains Option Contract

There are a number of different assets that are commonly bought and sold through option contracts, e.g., securities, commodities and real estate assets.

After a person has purchased an asset with an option contract, they have the right to buy an asset or assets at a fixed price in the future. Being able to keep a price fixed when many other prices are changing can be advantageous to investors. That is why many people buy things with option contracts.

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