By: Martin M. Shenkman, CPA, MBA, JD

An option is a right that you may choose to exercise, or not. For example, you may place a down payment on a parcel of real estate for an option or right to purchase it for at a specified price. If you decide not to exercise the option the landowner will generally keep your deposit. The purpose of an option is to give you a period of time to assess whether or not you want to complete the purchase. If you are the seller, an option could be a good way to sell a property in a softer market. Option can also refer to a right to purchase stock.

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