What is the Difference Between Options and Futures?

Options and futures are similar in a way that they are both based on trading that involves subsequent events. Buyers and sellers are making a short time gamble that the price of the underlying financial instrument will soar and drop. Both contracts are also considered advanced forms of share trading, require additional training or the use of a specialist to be able to fully understand their characteristics.

Both Futures owners and Options holders have access to a specified quantity of an asset that they can buy or sell at a specified price and date. The main difference between the two is the degree of their control over the underlying commodity. Futures owners are obligated to buy or sell, bound by their contract. Option holders on the other hand, have the right to buy and sell, so they have the option to let the deal expire but loose their investment in the process.

Both contracts are considered more risky than the traditional trading because they are speculative in nature. They carry big risks and may not be for everyone, especially for traders on a budget.