# Financial solutions - Options

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## Options

Financial contracts giving the right but not the obligation to buy a commodity, currency, or interest rate at a specific price.

Options can manage risks in:

- Foreign exchange rates
- Commodity prices
- Interest rates

## Put Options

Pays if a market falls.

## Call Options

Pays if a market rises.


Both have a buyer and a seller and both have a fixed duration before expiration. 

Both have a price for using the option called a strike price.

The strike price is the market price at which the option pays out, whether it is a Put option or a Call option.

![It is the strike price that triggers the option](https://i.imgur.com/Tb02vBx.png)

## Buyer side

An option is either **in the money** (In the pay zone above/below the line) or **out of the money** (worth nothing above/below the line)

If it's at the strike price, it's **at the money**.

## Seller side

Reverse the above.

Option seller is called the option seller.

Options are paid for in advance.

**Options insure against one risk but introduce counterparty risk**