option

   A right to purchase property or require another to perform upon agreed-upon terms. An option is paid for as part of a contract but must be "exercised" (acted upon) in order for the property to be purchased or the performance of the other party to be required. The "exercise" of an option normally requires notice and payment of a contract price. For example, a potential buyer of a building plot offered for sale at $300,000 might pay $4,000 for the option to buy, which gives her or him time to decide whether she or he wishes to proceed (effectively taking the property off the market during that period). If the time to exercise the option expires, then the option terminates. The amount paid for the option itself is not refundable, because it was the option that was being bought, whether it was exercised or not. An option can also be the right to renew something, such as a lease, the employment contract of an athlete, or some other existing business relationship.