Buyer's Option

In commercial contracts, an agreement between a vendor and a buyer that defines price and specifications over a specified time period for a product, but does not stipulate the quantity of the product that the buyer is obligated to purchase. In the auction industry, when multiple units of a product are being auctioned off, "buyer's option" refers to the right given to the winner of the auction of the first unit, to purchase any or all additional units at the winning bid price.

The buyer's option is advantageous to the buyer, who can choose to buy a greater or smaller quantity of product at a fixed price, depending on market conditions. However, it is detrimental to the manufacturer or supplier, since revenues from product sales cannot be estimated accurately. The manufacturer should, therefore, ensure that a supply agreement cannot be construed as a buyer's option contract. This can be achieved by simply specifying in the contract the fixed quantity of product that the buyer is obligated to buy.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Buyer's option — Option Op tion, n. [L. optio; akin to optare to choose, wish, optimus best, and perh. to E. apt: cf. F. option.] 1. The power of choosing; the right of choice or election; an alternative. [1913 Webster] There is an option left to the United… …   The Collaborative International Dictionary of English

  • buyer's option — Literally, any option which a purchaser may be entitled to under the contract of purchase; technically, the right of the buyer of securities on margin to pay or tender the amount owing to the broker and receive the securities. 12 Am J2d Brok §… …   Ballentine's law dictionary

  • buyer's option — noun : an option allowed to one who contracts to buy stocks at a certain future date and at a certain price to demand instead the delivery of the stock (giving one day s notice) at any previous time at the market price …   Useful english dictionary

  • buyer's option — right to purchase within a specific period of time …   English contemporary dictionary

  • Option — Op tion, n. [L. optio; akin to optare to choose, wish, optimus best, and perh. to E. apt: cf. F. option.] 1. The power of choosing; the right of choice or election; an alternative. [1913 Webster] There is an option left to the United States of… …   The Collaborative International Dictionary of English

  • Option (finance) — Stock option redirects here. For the employee incentive, see Employee stock option. Financial markets Public market Exchange Securities Bond market Fixed income …   Wikipedia

  • Buyer's Call — An agreement between a buyer and seller whereby a commodity purchase occurs at a specific price above a futures contract for an identical grade and quantity. Also known as a call sale, this agreement gives the buyer the option to fix the price of …   Investment dictionary

  • option — op·tion 1 / äp shən/ n 1: the power or right to choose; also: a choice made or available 2: a privilege of demanding fulfillment of a contract on any day within a specified time 3: a contract conveying in exchange for the payment of a premium a… …   Law dictionary

  • option — an agreement, often for a consideration, which permits the purchase or sale of something within a stipulated time, in accordance with the terms of the agreement. For example, a right by a tenant to take up a further lease of premises, usually… …   Financial and business terms

  • Option — Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a given date. Investors, not companies, issue options. Investors who purchase call options bet the stock will be worth more than the price set… …   Financial and business terms


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