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In a broader sense, a real option is a thinking way of decision making in an organization or real human lives. It is a sort of choice in deciding something. Most of the prevalent real option studies hire this broader sense.

In a narrow sense, a real option is a right or contract to buy or sell something real at a specified price on a specified day. The familiar examples are financial options.

In my research and study, I use the term, real option, in the narrow sense, which mostly has no market now. So I want to create new real option products and markets worldwide in the future, but they would probably be different from existing financial option ones. They would need the process of the market-make and could not expect large numbers of participants like financial option markets because they would be too much diversified and real option prices would be decided as the case may be. The image of real options is kind of insurances for real things. They could cover the certain values and risks of real things. I could develop new managerial theories by using these concepts and tools. For instance, top management can write a real option contract for a newly developing product and get the option premiums from buyers. The buyers can get a preemptive right for the new product by paying the premium price, which may go up or down through the market.

The writer company can cover the developing risks and costs by getting the real option premiums. If the development failed, the buyer would lose the premium paid. If the development succeeded, the buyer would gain more than the premium paid depending on the degree of the success. Whether the writer company could gain or not depends on the contract terms. In this way, companies can controll the risks of the development and at the same time sustain the present profits. Buyers can limit the risks of investing in new products by paying the premium price, which is far less than the actual value of the new products. They can also controll risks and may gain unlimited profits.