01 Jan 2001, Energy Risk glossary , Energy Risk
An option that gives the buyer (holder) the right, but not the obligation, to buy an underlying asset (often a futures contract, that is, enter into a long futures position) or physical commodity for a specified price within a specified period of time in exchange for a one-time premium payment.
It obligates the seller (writer) of the option to sell the underlying asset/futures contract (enter into a short futures position) or commodity at the designated price, should the option be exercised at that price.
* see also put option
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