Options are financial derivatives that give traders the right to buy or sell an underlying asset like stocks or commodities at a predetermined price within a specified time frame. It's like purchasing an insurance policy. The trader pays for protection against significant fluctuations in the market.

2. How does options trading work?

Unlike stock trading where you purchase shares and hold onto them in anticipation of their price increasing over time, options traders bet on how well they understand market conditions and factors affecting asset prices. The trader buys contracts known as 'calls' or 'puts,' giving them specific rights under certain circumstances.

3. What are call options?

Call options allow traders to buy assets at predetermined prices during a specific period; meaning they will profit if the market value goes above the set price before the expiration date stated on each option contract.

4. What are put options?

Put options let investors sell assets at pre-determined prices during a specified period; which spells profit if market value drops below their strike prices before expiration dates given on each contract

5. What is the difference between American and European-style Options?

The key difference between American and European-style option lies in their exercising styles; American-style option holders can exercise their contracts any time up until its expiration date whereas European-style option owners have only one chance at expiry.

7. What is Implied Volatility?

As assets do not alter their worth at the same rate over time, traders estimate implied volatility rates instead of actual volatility levels (which are difficult to ascertain precisely), and then act using these estimates.