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An option contract that gives the holder the right, but not the obligation, to buy 100 shares of an underlying security within a certain time frame, at a certain price (the ”strike price”) is a “call option” (or a “call). The concept is like leasing a particular car. You have the right to buy this car at the end of the lease term, but instead of paying the whole premium upfront, as in buying an option, you pay the premium ( in monthly installments) to the financing company. Your lease expires at the end of the term, and like with an option, you may exercise it, (buy the car or buy the stock), or simply let it expire (give back the car or do nothing on the options side.) That is how simple it is.

The opposite of a call is a “put option” (or a “put”). A put gives you the right to sell 100 shares of an underlying security within a certain time frame, but not an obligation, at a certain price (the “strike price”). You are guaranteed a sale at the predetermined strike price if the security falls below the strike price.

The premium for that option will be lower , when there is less time remaining until an option expires. For example, the premium for an option that expires in a month would be lower that the premium for an option that expires in two months. If you would want a downside protection (by buying a put) for an infinite period of time, the premium of such a put option would equal the price of the security itself.