It all started in London with a man called Maurice Kendall who presented a paper to the Royal Statistical Society in 1953.
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If on or before the expiration date Xyz is trading at less than $40 per share then you would not exercise your option and you would have lost the price you paid on the option $5.
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This now gives him time to arrange any permits he may need to construct the building he wants.
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Around a 1000 BC Aristotle Thales predicted by the stars that there would be a bumper olive harvest and bought options on the use of olive presses.
A property developer may take the option on a piece of land he wants to develop.