A currency options contract is a type of currency derivative which gives the buyer/holder of the contract the right (but not the obligation) to buy/sell the underlying asset at a predetermined price before or at the specified date. Meaning of option is that the option holder has the right but no obligation to sell or buy the currency before the specified date. The buyer / holder of the option purchase the right from the seller/writer for a payment called premium. The seller/writer of an option is obligated to settle the option as per the terms of the contract when the buyer/holder exercises his right. Call options and put options are the two types of options available in the currency option market.
