Trading option contracts has become widely popular in the stock market in recent years. Option contracts provide an agreement between a buyer and sellers on an underlying security (stock) for companies such as Apple, Tesla, Amazon...etc.
The option contract provides the buyer with a guarantee to buy the stock at a set price by a specific date, and the seller agrees to fulfill. Every contract typically guarantees 100 shares. For example, if Apple is trading at $150 today, instead of buying the stock, you can buy an option contract that guarantees you Apple shares at $150 no matter where its trading at in the future, but the trick is option contracts come with an expiration date. The longer the contract, the more expensive it becomes because it provides more time for the underlying stock to move in your favor.
Different kinds of options
Call option contracts: call contracts are bullish contracts. Buyers purchase these contracts when they're expecting the price of the underlying security to increase.
Put option contracts: put contracts are bearish contracts. Buyers purchase these contracts when they're expecting the price of the underlying sector to decrease.