The best known and most common type of option is that where an investor pays money (option money) for the call—that is for the right to buy shares at the current price in 3 months time.

This is best explained by an example. Suppose share A stands at 50s. (market price 49s. 10½d.–50s. 1½d.) and the option rate is 4s.

Then the investor pays:

Option money 4s.

Commission (as for buying a share at 50s. 1½d.)

This payment gives him the right to buy the share at the ‘striking price’ on any ‘declaration day’ within the term of the option.