What is the difference between the futures and options in financial jargon? I am interested in learning more about these two forms of financial trading. Thank you for solid info, including definitions, websites possible? Thank you.
Both are standardized contracts that can be negotiated. They would give you the right to buy and sell a stock or delivery of products (cereals, fruit, etc..) This is why they are called "derivatives". Both instruments are considered risky and may not be suitable for the novice.
Options: the right to buy (or sell) a stock (or any other financial asset) at any time before the expiry date. A is creation, it sells (or may be purchased) for small, compared to the price you real action on thecontract. Approaching the end, the price may increase.
Futures: the right to deliver (or take delivery of) a commodity at a specified date. The price paid is a guarantee. In this way, the farmer knows what he / she will do. So does the manufacturer or a retail store. For them to fruition is a intrument coverage.
But for many others, ultimately is a very speculative market. People without any firm (or enterprise at all) the creation of these contracts as if they actually owned a business. They can never take or deliver, because they are just speculators sitting ATA office. Some sell futures contracts to "farmers", giving them a guaranteed price, but hoping that the price of grain goes clamshell (that is to say, turn around and sell it to a real buyer of the goods like a supermarket). Others sell a contract for delivery of the supermarket, but in reality are speculators who are lloking for the price of the goods in the fall. They buy grain at prices recently fell and deliver them to the supermarket. (In reallity, they flip the contract on the open market).
Hope this helps.
An option gives the right to buy or sell something at an agreed price, with a future, if you own it to maturity, you need to buy or sell at the agreed price. Thus, futures are a much higher risk than options, but also provide much higher profits if done well. Futures are settled on a daily basis, then you spit or get money on the price trends of the future on a daily basis. The options are settled only at maturity and at the owner of the option.
Typically term is used to designate trades commodities and options are used to describe stock options.
They do not trade futures on stocks for a number of years, since the 80s but I think there are now few. But for most, the language is used as indicated.
The right loves above.
BTW, you can for options on futures contracts and to make things a bit more complicated.
For websites: I usually start with Wikopedia Investopedia but can also be very useful.
Posted on January 24, 2010.
