Definition: Definition of Option:
An option is a contract that gives the holder the right, but not the duty, to make a
specified transaction for a specified time.
The most common option contracts give the holder the right buy a specific number of shares of the underlying security (equity or index) at a fixed price (called the exercise price or strike price) for a given period of time. Other option contracts allow the holder to sell.
This is its most common practical business meaning, and the use in theoretical economics is analogous -- e.g. that owning a plant gives a firm the option to manufacture in it at any time or to sell it at any time. (Econterms)
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