market prices become unfavorable for option holders, they will let the option expire worthless and not exercise this right, ensuring that potential losses are not higher than the premium. If the market moves in a favorable direction, the holder may exercise the contract.

Options are generally divided into "call" and "put" contracts. With a call option, the buyer of the contract purchases the right to buy the underlying asset in the future at a preset price, known as the exercise price or strike price. With a put option, the buyer acquires the right to sell the underlying asset in the future at the predetermined price.1