How it works
The right to buy is called a "call option," and the right to sell is called a "put option." The buyer, who acquires the right, pays a premium (option price) in exchange for it, while the seller, who grants the right, receives that premium but takes on an obligation to fulfill it if the option is exercised.
What to keep in mind
A buyer's loss is limited to the premium paid, but a seller can face a large loss depending on how far the market moves — meaning the risk structure differs greatly between buyers and sellers. Because the mechanics are complex and leverage is involved, it is essential to fully understand the structure and risks before trading.