♣♣ ♣ ♣ This paper uses a stylized agency model to evaluate the economic efficiency of options contracts. The model allows us to compare the expected pay-off of shares and options when agents are risk-averse and they have a cost for supplying effort. We find that in the cases where options are preferred to shares the contract will fix an exercise price above the current market value of the project and a number of options inversely related to the probability of exercise. This contract is expected to be implemented in environments of high risk, in terms of variability of the performance variable, which helps to explain why options contracts predominate among firms in sectors with high