Securities Option Law and Legal Definition

A securities option is the right to buy or sell an underlying security at a specific price (the "strike price") and a specified time (the expiration date). [Andros v. Commissioner, T.C. Memo 1996-133 (T.C. 1996)].

There are two types of options: "Call" options and "put" options. In a call option, the grantor (or seller) of the option is required, if the buyer so desires, to sell the underlying security to the buyer at the strike price on the expiration date. With a put option, the grantor (or seller) of the option is required, if the buyer so desires, to purchase at the expiration date the underlying security put to him by the buyer at the strike price.