A foreign currency option contract gives the holder the right but not the obligation to buy or sell currencies at a set price on a specific date or before expiration. Options can be used to hedge potential transactions or transactions dependent on uncertain factors by limiting downside risk while allowing upside potential. Call options provide the right to buy a currency while put options provide the right to sell. Standard contract sizes are for 10,000 currency units and options typically expire on the third Friday of the expiration month, with American options exercisable anytime before expiration and European options only at expiration.