Difference Between Futures & Options

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Difference between futures options
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Introduction

• In futures trading, the investor is obliged to
  sell or buy the shares or stocks in the future on
  the predetermined date. The assets are traded at
  the predetermined price in future trading.
• The value of Options is determined based on the
  value of an underlying asset. Unlike futures
  trading in options trading, the investor is not
  under any obligation, to buy or sell the asset at
  a specific price before the expiration date of
  the contract. Depending on the will of the
  investors they can buy or sell the asset. Options
  are a derivative form of investment.
• We will further look at the differences between
  futures and options

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Difference

• As mentioned earlier future trading is associated
  with an obligation to complete the agreement and
  trade in the future at a predetermined date and
  price. In the case of options trading, the
  investor has an option to either trade or
  terminate the agreement at any time before the
  expiration date of the contract.
• Future trading is associated with high risk as
  compared to Options trading. In options, the
  risks are limited to the premium amount only.
• The future contract does not require any type of
  advance payment. Whereas in options trading you
  need to pay a premium amount upfront before the
  activation of the contract.
• There are no limits on profits or losses in the
  future. In the case of options, the losses are
  limited, and the profits are high.

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Conclusion

• Options and Futures operate differently but the
  basic essence of these financial products is the
  same as they try to profit from stock without
  investing the full sum.
• You should learn about derivatives even more to
  get a hold on the concept and become an active
  trader in the derivative markets, trading futures
  and options.

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