Options come in two variants, puts and calls. The call option gives the owner of the option the right, but not the obligation, to buy the underlying asset at the strike price. The put
option gives the holder of the contract the right, but not the obligation, to sell the underlying asset. The Black-Scholes formula describes the European option, which can only be exercised on the maturity date, in contrast to, for example, American options. The buyer of the option pays a premium for this in order to cover the risk taken from the counterpart's side. Options have become very popular and they are used in the major exchanges throughout the world, covering most asset classes.
The theory behind options can become complex pretty quickly. In this chapter, we'll look at the basics of options and how to explore them using the code written in F#.