Options are financial instruments that convey the right, but not the obligation,
to engage in a future transaction on some underlying security, or in a futures contract.
In other words, the holder does not have to exercise this right, unlike a forward or future.
For example, buying a call option provides the right to buy a specified quantity of a security at a set strike price at some time on or before expiration,
while buying a put option provides the right to sell.
Upon the option holder's choice to exercise the option, the party who sold, or wrote, the option must fulfill the terms of the contract.
The theoretical value of an option can be determined by a variety of techniques.
These models, which are developed by quantitative analysts, can also predict how the value of the option will change in the face of
changing conditions.
Hence, the risks associated with trading and owning options can be understood and managed with some degree of precision compared to
some other investments.
Here are some more links to learn more about Options in general