An option is a contract between two parties. In return for this, he pays the writter the option premium on conclusion of the contract. The person selling an option is known as a writer . When options holder wish to take up their rights under the contract they are said to exercise the contract.
Options are instruments with limited life spans.
The date on which an option comes to the end of its life is known as its expiry date. The expiry date is the last day on which the option may be exercised or traded. After this date the option disappears and cannot be traded or exercised. Options are available in a range of different exercise styles that are specified when the options are traded. The option buyer and the option seller have the opportunity to close their options contracts at any time by means of an offsetting transaction.