An option agreement is a legal agreement between a writer and a producer where the producer agrees to pay the writer a fixed amount of money for the option to later produce the film. It is akin to a car down payment, where you pay a set percentage upfront and pay the remainder of the funds at a later date. Option agreements are most often used when a producer requires more time to gather funds for a film, pitch it to studios, and/or find talent. It gives producers time to develop a project without a full investment. 

Option agreements are most frequently used at the beginning phases of a project, when a writer first pitches a script to a producer, allowing the producer to develop and/or pursue a project without the burden of fully purchasing the rights.