Updated Jun 21, What is an Option Agreement?
An option agreement is a legally binding contract between two entities outlining each counterparty's responsibilities to the other. Understanding Option Agreement There are several definitions of an option agreement in the financial and business environment.
In general, an option agreement is an arrangement between two individuals, companies, or option is agreement combination of the two, which outlines terms and conditions for each party. This type of option agreement is most common in the commodities markets.
Traders use options to speculate.
It is a relatively risky investing practice. Other Types of Option Agreements An option agreement may also be a signed arrangement between an investor seeking to open an options account and his or her brokerage firm.
The arrangement between an employer and an employee is also an option agreement. It sets the terms of the employee's stock options benefit.
These are incentives or rewards the employee earns for good work and loyalty. Another common option agreement is in the real estate market. Compare Accounts.