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TeachMeFinance.com - explain option option -- an agreement granting the right to buy or sell property, or to use it in some fashion, for a stated price within a stated period of time. In investments, an option refers to a contract granting the right to buy or sell a security or a commodity at a set price within a stipulated time. historic definition... Option -- Property bought or sold to be received or delivered by the buyer or seller in accordance with the terms agreed upon. Sometimes the buyer pays for the privilege of calling for the delivery of the property within a certain time if he so wills, but he is not obliged to take it; sometimes the seller pays for the privilege of delivering the property. In speculation an option is the purchased privilege of either receiving or delivering a specified amount of anything (as stocks , grain, cotton, coffee, etc.) at a specified price within a specified time. In stocks bought on buyer's option the buyer may, when the option is for four days or more, demand delivery of the stock on any day within the time specified on one day's notice to the seller. In stocks sold on seller's option, when the option is for four days or more, the seller may deliver the stock to the buyer on any day within the time specified on one day's notice to the buyer. When a dividend becomes due on a stock during the pendency of an option on it the dividend is collected by the seller of the stock, who holds it, allows interest on it and pays the dividend, with the interest on it, to the buyer on the settlement of the contract. When an option on a stock matures during the closing of transfer books the seller of the stock gives to the buyer of the stock a due bill for the amount of the dividend which is payable when the dividend is paid, but the due bill does not bear interest. About the author Mark McCracken Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English". Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.