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Option trading is a type of investment strategy where an investor buys or sells options contracts on an underlying asset such as stocks, ETFs, indices, or commodities. Options are financial derivatives that give the buyer the right, but not the obligation, to buy or sell the underlying asset at a predetermined price and time.

Option trading allows investors to speculate on the price movement of the underlying asset without owning it outright. This can be done by either buying a call option if they think the price will go up or buying a put option if they think the price will go down. Alternatively, investors can sell options contracts to generate income or hedge against potential losses in their portfolio.

Option trading can be complex and involve a significant amount of risk, but it also provides opportunities for potentially high returns. It is important for investors to understand the different types of options strategies, factors that affect options prices, and risks associated with option trading before investing.