A swaption, also known as a swap option, refers to an option to enter into an interest rate swap or some other type of swap. In exchange for an option's premium, the buyer gains the right but not the obligation to enter into a specified swap agreement with the issuer on a specified future date.

Swaptions are over-the-counter contracts and are not standardized, like equity options or futures contracts. Thus, the buyer and seller need to both agree to the price of the swaption, the time until expiration of the swaption, the notional amount and the fixed/floating rates.