a choice that an

An option or option-like feature embedded in a real investment opportunity.

a non-traded asset or liability whose profit-and- loss sensitivity to a commodity price or other market variable mimics that of an option contract. Extracting oil from an oil field is a classic example of a real option. If oil prices remain low, the field can be left dormant at no additional cost. If oil prices rise sufficiently, the profits earned on the sale of the oil will more than outweigh the costs of extraction.

a limited investment that creates high-leverage exposure to the upside of a market," says Raynor