Options are derivative financial instruments meaning that their prices fluctuate with the underlying stock they track and several other factors. There are two types of options, calls and puts, which can be combined in various strategies to create income or hedge against a position.

Both of these options can be bought or sold. If bought, the owner has the right to exercise the option and either buy or sell 100 shares of the underlying stock based on whether it was a call or put that was bought. On the other hand, if sold, then the seller has the obligation of buying or selling 100 shares of the underlying stock to the buyer of the option.

Various other factors determine option prices such as time to expiration date, extrinsic and intrinsic value, volatility of the underlying stock, earnings events, etc.