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An option is a contract that allows (but doesn't require) an investor to buy or sell an underlying instrument like a security, ETF or even index at a predetermined price over a certain period of time. Buying and selling options is done on the options market, which trades contracts based on securities.
As a stock options trader you can write options on stocks you own, but you can also buy and sell options in the open market with no need to own the underlying stock.

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