In every financial market, contracts form the basis of things. Contracts are legally binding agreements designed to serve specific purposes and needs. In financial markets, contracts are drafted to generate profit and are also known as "financial instruments" — abstract tools designed to generate profit.

One of these tools developed to achieve profit is options. Like other derivatives, options contracts follow the price of the underlying asset, meaning their value greatly depends on the price of other instruments (cash or derivatives). An option is a contract that grants the party the right to buy/sell a financial instrument at a predetermined price, on or before a predetermined date.