The
main fundamental difference between Future and option lies
in the obligations they put on their buyers and sellers. An option gives the
buyer the right, but not the obligation to buy or sell a certain asset at a
specific price at any time during the life of the contract. A futures contract
gives the buyer the obligation to purchase a specific asset, and the seller to
sell and deliver that asset at a specific future date, unless the holder's
position is closed prior to expiration.
Aside from commissions, an investor can enter into a futures contract with no upfront cost whereas buying an options position does require the payment of a Premium. Compared to the absence of upfront costs of futures, the option premium can be seen as the fee paid for the privilege of not being obligated to buy the underlying in the event of an adverse shift in prices. The premium is the maximum that a purchaser of an option can lose.......
Aside from commissions, an investor can enter into a futures contract with no upfront cost whereas buying an options position does require the payment of a Premium. Compared to the absence of upfront costs of futures, the option premium can be seen as the fee paid for the privilege of not being obligated to buy the underlying in the event of an adverse shift in prices. The premium is the maximum that a purchaser of an option can lose.......
