An options contract is a financial agreement that gives an investor the right, but not the obligation, to buy or sell an underlying asset, such as stocks, at a predetermined price within a specific time frame. There are two main types of options: call options, which allow the purchase of the asset, and put options, which allow the sale of the asset. Options contracts are often used for hedging or speculation. Investors can leverage their positions with a smaller initial investment compared to buying the underlying asset directly. However, options can be complex and carry risks, so understanding their mechanics is essential before trading.