Betty Liu, Executive Vice Chairman for NYSE Group, explains:

What is options trading and how does it work?

So, options are financial instruments that derive their value from the underlying securities, such as individual stocks. Options investors can buy or sell the underlying security at a specific price before that contract expires. So, options where you can buy a specific security or underlying security are called "call options." Options where you can sell that underlying security are called "put options. Now you can trade these options, you can let them expire, and you can buy and sell them.