Standardized contracts traded between two counterparties (a purchaser and a seller) giving the purchaser the right, but not the obligation, to purchase from (in the case of call option) or to sell to (in the case of put option) the seller a specific amount of the underlying asset at a predefined future date and at an agreed price.
European option
The option may be exercised only at the expiration date.
American option
The option may be exercised within a particular period of time.