A contract that gives the holder the right, but not the obligation, to exchange currency at a specified rate (the strike price) before a specified date. This allows the holder to hedge or speculate on currency movements without being required to execute the transaction.
Example:
An investor buys a call option on EUR/USD, granting them the right to purchase euros at a set price within the next three months. If the market moves in their favor, they can exercise the option to profit from the favorable rate; if not, they can let it expire without obligation.
