An equity option is a derivative contract between two counterparties agreeing to the details of the trade today with a fixed quantity and a specific stock or underlying index which may be traded in the future at a fixed price on or before a fixed future date. This is very similar to the definition of a forward or a futures contract. However, with an equity options contract, one side of that transaction has the right to use this contract if they want to, but can also choose to abandon the contract if they want as well. This is the long side of the option contract. The short side of an option contract does not have a choice. If the long decides to use the option, which is referred to as exercising their option, the short side of the contract is obligated to fulfill the requirements of that transaction. Despite the short side not having any choice as to whether the option is used or not, they do receive an upfront payment which is referred to as the option premium. In terms of some key option terminology, the long side of the option contract, the party that has the choice as to whether to use the option or not, can also be referred to as the option holder or the option buyer. And the short side of the option contract, the one that does not have the choice, but receives the option premium, can also be referred to as the option seller or the option writer. That price within the option contract which determines the price of the transaction, if it takes place, is referred to as the strike price or the exercise price. And the date in the future when this option contract may be exercised by the option holder is referred to as either the expiration date or the maturity date. There are two separate types of option contracts. First, the call option gives the owner of the option the right to buy the underlying asset at the strike price if they wish to. A put option is one which allows the option owner to sell the underlying asset to the short side of that option contract and to receive the exercise price should they wish to do so. These two types of contracts are separate contracts and for both of these contracts, there will be an option owner and an option seller. It is important to be careful with the distinction between the direction of trade of the option itself, denoted by the long and the short position and the direction of trade of the underlying assets, which is determined by whether it is a call or a put option. For a call option, if the transaction takes place, the underlying asset is purchased by the owner of the option. If it is a put option, the underlying asset is purchased by the seller of the put option if it is exercised. In terms of when an option contract can be exercised, there are two main different ways this can be determined within the option contract. European options can only be exercised on the final expiration date. American options can be exercised by the holder of the option at any point up to and including the expiration or expiry date. And it's worth noting that this terminology, American and European options, has nothing to do with the geographical locations of where they are mainly traded. It is purely terminology.