Real options refer to financial instruments that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specified time frame. These options are traded on various financial markets and can be used by investors to hedge against risk or speculate on future price movements.

Real options are different from traditional financial options in that they are based on real assets such as commodities, stocks, or currencies, rather than financial instruments. They can be used to manage risk and uncertainty in a variety of industries, including energy, agriculture, and manufacturing.

Real options can take various forms, including call options, which give the holder the right to buy an asset at a predetermined price, and put options, which give the holder the right to sell an asset at a predetermined price. These options can be used to protect against price fluctuations, lock in profits, or take advantage of potential opportunities in the market.

Overall, real options provide investors with a flexible and dynamic way to manage risk and uncertainty in the financial markets. By understanding and utilizing real options effectively, investors can enhance their investment strategies and potentially increase their returns.