Options trading is a financial practice where investors buy and sell contracts that give them the right, but not the obligation, to purchase or sell an underlying asset, such as stocks, at a predetermined price within a specific time frame. These contracts are known as options, and they come in two types: call options, which allow the purchase of the asset, and put options, which allow the sale. Traders use options to speculate on price movements or to hedge against potential losses in their investment portfolios. By leveraging options, investors can potentially increase their returns while managing risk, but they also face the possibility of losing their entire investment if the market does not move in their favor.