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In general, an option gives to the buyer the right, but not the obligation, to buy or sell a good, whereas the option seller must {{U}}(21) {{/U}} accordingly. Many different types of option contracts exist in the {{U}}(22) {{/U}} world. The two major types of contracts {{U}}(23) {{/U}} on organized options exchanges are calls and puts.
A call gives to the buyer of the option contract the right to buy a specified number of units of an underlying asset, at a specified price called the exercise or {{U}}(24) {{/U}} price, on or before a specified date called the expiration date or strike date. A put gives its the buyer the right to sell a specified number of units of an underlying asset at a specified price on or before a specified date. In all cases the {{U}}(25) {{/U}} of the option contract, the writer, is subordinate to the decision of the buyer, and the buyer exercises the option only if it is {{U}}(26) {{/U}} to him or her. The buyer of a call benefits if the price of the asset is {{U}}(27) {{/U}} the exercise price at expiration. The buyer of a put benefits if the asset price is below the exercise price at expiration.
The complete definition of an option must clearly specify {{U}}(28) {{/U}} the option can be exercised. A European - type option can only be exercised on a specified date, usually the {{U}}(29) {{/U}} date. An American -type option can only be exercised by the buyer at any time until the expiration date. American options are used on {{U}}(30) {{/U}} of the organized options exchanges in the world. Both types of options can be freely traded at any time until expiration.