what is the difference between futures and options

unlike futures, options do not have to be used once purchased - they just allow you to do so- and they can be used at any time before their expiry, not neccesarily on that date.


basically, gives you more flexibility when hedging

FUTURE IS LIKE CASH MARKET PRICE.. VERY SMAL DEIFFERENCE PRICE FORM CASH

IF RELIANCE CMP 2000 CASH: FUTURE 2010

AND OPTION INCLUDES PUT AND CALL OF FUTURE

PUT PART OF FUTURE WORKING AGAIST MARKET
CALL IS WORKING RESPECT TO FUTURE PRICE LEVEL
PUT AND CALL ARE VERY SMALL AMOUNT OF LOT

a futures contract is an agreement to buy or sell a specified commodity at a specified price at a future date.

if l buy a December contract for Crude oil at $110 then l am bound to pay for that contract; when December rolls around, if l can sell a December delivery contract for more than l paid in the first place, l profit.

Futures contracts *are* priced differently for the same commodity based on the delivery date; the reason for this is to reflect the cost of holding the commodity; so if l bought oil for October & simultaneously sold for December, there would be no profit as the difference in price reflects the cost of holding the oil for 2 months.

an options contract gives the right, but not the obligation to buy or sell a specified security at a future date (usually any time up to expiry, there r more exotic contracts though).

The primary difference between options & futures is that options give the holder the right to buy or sell the underlying asset at (or, if the option is american-style, before) expiration, while the holder of a futures contract is obligated to fulfill the terms of his/her contract.

in case of options, for a buyer (or holder of the option), the downside is limited to the premium (option price) he has paid while the profits may be unlimited. for a seller or writer of an option, however, the downside is unlimited while profits r limited to the premium he has received from the buyer.

it costs nothing to enter into a futures contract whereas there is a cost of entering into an options contract, termed as premium.
For more details on the same u can also visit below link. http://zibika.com/a/article/derivatives/knowledge%20basics/29