Options vs. Futures

Options

• Options are financial instruments that are derivatives based on the value of underlying securities such as stocks.
• Call options 
• allow the holder to buy the asset at a stated price within a specific time frame.
• Put options 
• allow the holder to sell the asset at a stated price within a specific time frame.
• Each call option has a bullish buyer and a bearish seller, while put options have a bearish buyer and a bullish seller. 
• Investors will use options to hedge or reduce the risk exposure of their portfolio.
• Each option contract will have a specific expiration date by which the holder must exercise their option. 
• The stated price on an option is known as the strike price.
• Options contracts usually represent 100 shares of the underlying security, and the buyer will pay a premium fee for each contract. 
• For example, if an option has a premium of 35 cents per contract, buying one option would cost $35 ($0.35 x 100 = $35).
• Options are also one of the most direct ways to invest in oil.
• American options can be exercised any time before the expiration date of the option, while European options can only be exercised on the expiration date or the exercise date.

Futures