Real options, also known as investment options, are financial instruments that give the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specific time frame. Real options are different from traditional financial options in that they are based on real assets or projects rather than financial instruments.

Real options can be used to assess and manage the value of investment opportunities that have uncertain outcomes. They allow investors to capitalize on opportunities that may arise in the future, such as the decision to expand a business, enter a new market, or delay a project.

Real options can be classified into different types, including options to expand, options to abandon, options to delay, and options to switch. These options provide flexibility and strategic value to investors, allowing them to make better decisions in the face of uncertainty.

Overall, real options provide a valuable tool for investors to assess and manage the risks and opportunities associated with their investments. By considering the flexibility and strategic value of real options, investors can make more informed decisions and maximize the value of their investments.