Corporations and governments frequently sell assets with embedded real options to competing buyers using both cash and contingent bids. Examples include natural resource leases, real estate, patents and licenses, and start-up firms with growth options. This paper models these auctions of real options, incorporating both endogenous auction initiation and post-auction option exercise. I find that common security bids create moral hazard and distort investment. Strategic auction timing affects auction initiation, security ranking, equilibrium bidding, and investment, and should be considered jointly with security design and seller's commitment level. Optimal auction design aligns investment incentives using a combination of down payment and royalty payment, but inefficiently delays sale and investment. I also provide suggestive evidence for model predictions using data from the leasing and exploration of oil and gas tracts. Altogether, these results reconcile theory with several empirical puzzles and imply novel predictions when compared with those from the existing literature.