Options contracts are derivatives that receive their value from the price of a share or an underlying asset like commodity or commodity futures, etc. When you purchase an options contract on an underlying asset, you buy a contract that will give you the right to purchase that underlying asset at the strike price, the price agreed in the options contract.
This right could be exercised on or before the contract expiry date, depending upon the type of options, i.e., whether it is American or European options. For example, in the American Options, the contract could be exercised before the contract expiry date. In contrast, it could only be exercised on the contract expiry date in the European Options.
Types of Options
There are two types of Options based on the buy and sell of a contract, i.e., Call Options and Put options.