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In the film industry, an option is a contractual agreement between a movie studio, a production company, or a producer (henceforth called the "producer") and a writer, in which the producer obtains the right to buy a screenplay from the writer, before a certain date. In the same way, producers can obtain options to write screenplays based on books, articles, video games, songs, or any other conceivable works of authorship. The term is often used as a verb in Hollywood: Paramount optioned the short story by Philip K. Dick. Financially the contract qualifies as a real option and is thus very similar to other types of options.

When a screenplay is optioned, the producer has not actually purchased the right to use the screenplay. He has simply purchased the exclusive right to purchase the screenplay at some point in the future, if he is successful in setting up a deal to actually film a movie based on the screenplay. This is usually a slow development, in which a "package" of sorts is created. In this "package" creation time the producer must get the screenplay written (if the option was on a book), obtain informal agreements with the director, the major actors, the financiers, and before taking it to a studio who can provide distribution and more financing, in this time the producer must get the screenplay polished to suit all participants—the exclusivity of the option allows this to be prepared without risk of a rival attempt to produce the same property. When this goes wrong, it leads to development hell. If all this tentative planning falls into place, then actual agreements are signed, the producer obtains money to start operations, the option is exercised with part of this money, and the producer actually buys the screenplay from the writer.

Options are not expensive by the standards of Hollywood movies. For True Romance, Quentin Tarantino received $50,000 to option his script.^[1] Many writers are happy to receive a few thousand dollars. Option contracts typically do specify the eventual cost of the screenplay, if the producer does end up exercising the option.

Since optioning a screenplay is far cheaper than buying it, options are very popular in Hollywood for speculative projects.

Options are exclusive for, usually, one or two years. If this period of time expires, the producer no longer has the right to buy the screenplay, and the writer can option it to a different producer. Most option agreements specify the prices of additional extensions, should the producer be unable to put the movie together in the originally specified term, and choose to extend.

The above rules also apply in general to the option contract for a completed play between playwrights and theatrical producers. A big difference can be found in the playwright's refusal to allow their product to be changed in any way without the consent and involvement of the playwright. The option will provide for the provisions triggered by the purchase of the play when the producer has put his investors and money together. Occasionally, a play will be commissioned by a producing organization, and in that case the writer will not be working "on spec", and the notion of an option will not arise.

• Option (law)
• Real option

1. ^ Reservoir Dogs: Lawrence Bender's Commentary on DVD Special Edition