HomeTradingFutures and Options Trading: What's the Difference?

Futures and Options Trading: What’s the Difference?

Futures and Options Trading 

Future and option trading is one of the most popular equity derivative instruments. These two contracts are known as derivatives because their value is derived from underlying assets. Purchasing future and options contracts is similar to purchasing stocks from the market. However, some key differences differ in the future from options trading. In this blog, we will tell you the difference between the future and option trading.

What are the Futures and Options Trading? 

In future and option trading. A future is a right with an obligation to buy/sell the underlying assets on the specified price and date whereas the obligation is a type of derivative trading that allows investors the right to buy the shares when the position is right before the expiration date of the contract. If you want to earn a huge profit in F&O you need to follow the best future option strategy.

How Do Future and Option Trading Differ? 

When an investor chooses to invest in future trading, he has the right to buy/sell an underlying asset at a predetermined date and price. Whereas in the options trading the right without an obligation to buy or sell shares at a specific time and price. However, futures and options are both equity derivative products where investors invest on them to earn huge money.

Apart from the right to obligation, many factors differ in future contracts from option contracts.

Obligation: In the future option trading. A future derivative is a contract between the two parties to buy/sell shares at a specific price and time. Which if an investor invests in futures trading he will oblige to buy the shares on the predetermined future date. If your future option strategy works in the right manner, you can earn a huge profit from the investment.

In case, if an investor invests in the options derivatives, he avails the right to the buyers to buy the assets at the fixed price. However, this is no obligation to purchase the shares at a specific price at any time, until the long contract is in effect.

Risk: When it comes to risk, investment in the future is relatively higher than options. Because no matter your investment goes against you, you need to buy the shares at the predetermined date. Let’s say the market price of the assets in which you have booked falls down. it is obligated to buy that share. Whereas in options, you can bring down the potential loss by selling shares when the price gets slow down. However, future trading offers you a huge investment return, but all your odds must be in your favor.

If you want to understand the game of the future option trading, you need to make a stranglehold on the futures and options strategies.

Advance Payment: Though there is no upfront cost when it comes to future and options trading, but, buyers can get the tokens to book the shares. These tokens work as premiums in the future and option trading. In options, after paying the premium, if an investor finds the share price less attractive, he can sell the orders. But, in the future, this facility is not available.

Contract Execution: In future option trading. When an investor invests in the future contracts he needs to execute the orders every Thursday of the last month. Whereas in options contract can execute anytime before the expiry date. So, when it comes to contract executive options give you more flexibility than future trading.

How to Trade in Futures and Options?

Future and options trading are done in the contract of 1 month, 2 months, and 3 months. You need to execute the orders in future option trading last Thursday of every month. Trading in the future is relatively easier than options. Because, in the future, you only need to trade at future prices. And there will be one future price for a stock at a contract. But the risks are unlimited in the future trading than options.

Nothing is tough in the stock market. If you follow the futures and options strategies effectively, you will get a better return on the investment and know-how to offset the risk of losing money while making investment in the market.


We hope this comprehensive guide on the future and options trading helps you a lot. After understanding an actual difference between both derivatives, now you have known that which is best for your goals and risk appetite.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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