An underlying option security is the asset on which an option contract is based. An option is a contract between a buyer and a seller that enables the buyer to purchase an asset at a predetermined price on or before a specific date, while the seller is obligated to sell the asset at the predetermined price. Options have value and the underlying security determines that value.

Underlying option securities are typically stocks or ETFs (exchange-traded funds). For example, if you are trading a put option on Apple Inc., the underlying asset would be the Apple Inc. stock. Similarly, if you are trading a put option on the S&P 500 ETF, then the underlying asset would be the S&P 500 ETF.

Options contracts are typically bought and sold on the open market. For example, you can trade options through an online broker. When trading options, the buyer of the option has the right, but not the obligation, to buy or sell the underlying security at the agreed upon strike price before the expiration date, while the seller of the option must make delivery of the underlying security should they be assigned an exercise notice.

Traders and investors use options to either speculate on, or hedge against, the future price movements of the underlying security. With options trading, there are a variety of factors to consider, including the price of the option, the expiration date of the option, the strike price, and whether the option is a call or a put.

Underlying option securities are important for the options trading process. The underlying security will determine the price of the option and the payoff to both the buyer and seller if the option is exercised. Thus, if you want to trade options and make money, it is important to understand the underlying asset and the risks associated with it before buying the option.