There are three typical uses for options in finance;

• Hedging
• Speculation
• Arbitrage

$$ $$ Hedging involves using options to reduce risk. The typical example is purchasing a stock and a put option as insurance against the stock price going down. $$ $$ Speculation involves taking on risk with a view on how the asset will change in price in the future, and purchasing an option enables the speculator to gain a larger exposure to the asset price compared to purchasing the asset itself (given a fixed amount of money to gain exposure). $$ $$ Arbitrage exploits mispriced assets in the market, and gains profit by buying risk in one place and selling it in another.