Appendix 1

Option Agreement

DEFINITION OF 'OPTION AGREEMENT'1. A signed agreement between an investor who is seeking to open an options

account and his or her brokerage firm. This agreement is used to verify the

investor's level of experience and to ensure that the investor clearly understands

the various risks involved when trading options. 

2. An agreement between two parties that provides one of the parties with the

right but not the obligation to buy, sell or obtain a specific asset at an agreed

upon price at some time in the future.

INVESTOPEDIA EXPLAINS 'OPTION AGREEMENT'

1. This agreement illustrates that the investor understands the rules set forth

by the options clearing corporation and that he or she will not be an undue

risk to the brokerage firm. An investor is generally required to understand

the option disclosure document, which highlights various options

terminology, strategies, tax implications and unique risks, before the broker

will allow the investor to trade options.

2. A common type of option agreement is found in the real estate market,

where one party buys the right to have the first chance of purchasing a

piece of property at a specific price at some point in the future. Another

common type of option agreement is a written outline that provides the

details of an employee's ability to obtain stock options.