Options trading involves the buying and selling of financial contracts granting the right to buy (call option) or sell (put option) an underlying asset at a predetermined price within a specified timeframe. Call options benefit from a rising asset price, while put options profit from a declining one. Traders can buy or sell these options, and common strategies include buying calls or puts for directional bets, selling options to generate income (with associated risks), and more advanced strategies like covered calls and protective puts.
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