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Q.What is an option contract or option agreement?
A.An option contract is a contract which gives a party to the contract the right, but not the obligation, to exercise their rights under the contract. To simplify, when an individual or business offers to say buy gold at $600 per ounce, that offer is revocable (can be cancelled) unless the person to whom the offer is made pays some form of consideration (e.g., a fee or price) to keep the offer open. When consideration is paid, the offer becomes an option contract under which the buyer would have the right, but not the obligation, to buy gold at $600 per ounce for 30 days.
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