Future vs. Option

What's the Difference?

Future and option are both types of financial derivatives that allow investors to speculate on the future price movements of an underlying asset. However, there are some key differences between the two. A future is a contract between two parties to buy or sell an asset at a predetermined price and date in the future. It obligates both parties to fulfill the terms of the contract. On the other hand, an option gives the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified time period. Options provide more flexibility as the holder can choose whether or not to exercise the contract. Additionally, futures are typically used for hedging or speculation on price movements, while options are often used for hedging or as a form of insurance against potential price fluctuations.

Comparison

Further Detail

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