Calls and Puts: How They Work 
When you buy or sell an option, you are actually entering into a contract. An option does not convey any ownership in anything, but it creates rights and obligations between the buyer and seller. Just like a stock, there are 2 sides to an option transaction, a buyer and a seller. Options are securities called derivatives. Derivative simply means something that has it value based on something else. Therefore, an option has its value based on the stock it is written against. Options are traded on major exchanges in the U.S. and are regulated by the Securities and Exchange Commission.
The buyer of an option obtains the right to sell the underlying security on which it is based. The seller of an option takes on the obligation to deliver the security on which it is based. Standard options have expiration dates up to 9 months from the day the exchange issues them. Long Term Equity Anticipation securities or LEAPS, is the term used for options expiring at some time period longer than 9 months from the date of issue, for example 1 year.