Underlying Option Security

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DEFINITION of 'Underlying Option Security'

An underlying option security is the financial instrument on which a derivative's (i.e., an option's) value is based – it provides the price that is used to determine the value of the derivative. An option is classified as a derivative because its value is derived from the underlying security.

INVESTOPEDIA EXPLAINS 'Underlying Option Security'

An option holder has the right, but not the obligation, to buy or sell a particular instrument at a specified price and date in the future.

RELATED TERMS
  1. Underlying Asset

    A term used in derivatives trading, such as with options. A derivative ...
  2. Underlying Security

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  3. Delta

    The ratio comparing the change in the price of the underlying ...
  4. Derivative

    A security whose price is dependent upon or derived from one ...
  5. Risk

    The chance that an investment's actual return will be different ...
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