Difference between Futures and Options Contracts

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Futures are contracts to buy or sell an asset at a specific price on a specific date in the future. Options are contracts that give the buyer the option to buy diff between option and future trading sell a particular asset at a specific price anytime before a specific future date. Futures are contracts to buy or sell a particular asset or cash equivalent on a specified future date. For example, a company may use a futures contract to lock in the price of a foreign currency it needs to buy at some future date.

Futures are also widely used for speculative trading. The futures contract is legally binding, no matter what the market value of the asset is when the contract matures. Both the buyer and the seller of a futures contract face potentially high losses if the market is not performing in their favour. To find out more about futures, try the ASX's futures online course. An option is a contract between two parties. The buyer has the right, but not the obligation, to buy or sell an asset, at a set price, on or before a specified future date.

The seller of an option keeps the money paid for the option whether or not the buyer exercises their rights. If you buy an option but don't exercise your right diff between option and future trading buy or sell the asset by the due date, it expires and becomes worthless.

Options can be bought or sold at any time. The market price of an option will reflect the current value of the asset and the time left before the option expires. Selling an option can diff between option and future trading very risky especially if you don't already own the underlying asset. If the market price rises above the 'exercise' price you may be forced to buy at the market price and immediately sell at the lower 'exercise' price, incurring an immediate loss.

Try the ASX's options course if you want to find out more. Binary options are a type of option where you try to predict the short-term movements of a share price, currency, index or commodity. Unlike other options the holder does not have the right to buy or sell the underlying asset. They are relatively new in Australia and are a speculative, high risk product.

Futures and options are complex products. Even experienced investors will struggle to understand the risks involved in trading them. We recommend you do not invest in these diff between option and future trading unless you have a written Statement of Advice from an independent, licensed financial planner stating that the product is suitable for you. Seek financial advice if you need further information and assistance about futures and options. Futures Options Futures Futures are contracts to buy or sell a particular asset or cash equivalent on a specified future date.

Options An option is a contract between two parties. Binary options Binary options are a type of option where you try to predict the short-term movements of a share price, currency, index or commodity. Warning Futures and options are complex products. Quick links Unclaimed money Publications Financial advisers register Financial counselling Payday loans Unlicensed companies list Report a scam How to forex trading strategy combining moving average convergence divergence and parabolic sar Other languages eNewsletter.

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