Gold Option

DEFINITION of 'Gold Option'

An option to buy or sell gold bullion at a future date at a set price. The date (delivery date), quantity and price (strike price), are all predetermined. The option is just that, an option, and is therefore not an obligation on the part of the investor to either buy or sell the gold.

BREAKING DOWN 'Gold Option'

An option is similar to a futures contract in that the price, date and amount are preset for both. The main difference between the two is that a futures contract is an obligation, or promise, made by the investor to uphold the contract whereas an option is not obligation.

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RELATED FAQS
  1. Does the seller (the writer) of an option determine the details of the option contract?

    The quick answer is yes and no. It all depends on where the option is traded. An option contract is an agreement between ... Read Answer >>
  2. What is the difference between options and futures?

    The main fundamental difference between options and futures lies in the obligations they put on their buyers and sellers. ... Read Answer >>
  3. What is the difference between "right" and "obligation" on a call option?

    Learn what a call option is, what determines a buyer and seller of an option, and what the difference between a right and ... Read Answer >>
  4. When is a put option considered to be "in the money"?

    Learn about put options, what they are, how these financial derivatives operate and when put options are considered to be ... Read Answer >>
  5. Can an option have a negative strike price?

    The simple answer is that, at least when it comes to exchange traded options, an option can't have a negative strike price ... Read Answer >>
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    Find out more about forward contracts, call options, the mechanics of these financial instruments and the difference between ... Read Answer >>
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