Gold Option

Search Dictionary

Definition of 'Gold Option'

A gold option is a contract that gives the buyer the right, but not the obligation, to buy or sell a certain amount of gold at a specified price on or before a specified date. The price at which the gold can be bought or sold is called the strike price.

Gold options are traded on the Chicago Mercantile Exchange (CME) and the London Metal Exchange (LME). The CME offers gold options with a variety of strike prices and expiration dates. The LME offers gold options with a single strike price and a single expiration date.

Gold options are used by investors to speculate on the future price of gold, to hedge against the risk of a decline in the price of gold, or to lock in a price for gold that they need to purchase in the future.

Gold options are also used by traders to generate income. For example, a trader could sell a gold call option if they believe that the price of gold will decline. If the price of gold does decline, the trader will keep the premium that they received for selling the option.

Gold options are a complex financial instrument and should only be traded by investors who understand the risks involved.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.