Options are contracts that grant the holder the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price within a specific time frame. They are a key instrument in derivatives markets, used by traders and investors for hedging risk, generating income, and speculating on price movements. Options can be based on stocks, indexes, commodities, or currencies, and their value is influenced by factors such as volatility, time decay, and the price of the underlying asset.