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An option contract gives the buyer the right, but not the obligation, to buy or sell an asset at an agreed price before a future date. Call options allow the purchase of an asset at a set price, while put options allow the sale of an asset at a set price. This flexibility allows traders to benefit from price movements without being locked into a specific price. However, this right comes at a cost known as a premium. Owners of put options can protect against price declines while benefiting from price increases, and vice versa for owners of call options.
