What are futures options?

Futures options can be a low-risk way to approach the futures markets. Many new traders start by trading futures options instead of straight futures contracts. There is less risk and volatility when buying options compared with futures contracts. Many professional traders only trade options.

What are futures & how do they work?

Futures are derivative contracts to buy or sell an asset at a future date at an agreed-upon price. Futures contracts allow players to secure a specific price and protect against future price swings. You can buy futures on commodities like coffee, stock indexes like the S&P 500 or cryptocurrencies like Bitcoin.

What are options and how do they work?

An option is the right, not the obligation, to buy or sell a futures contract at a designated strike price for a particular time. Buying options allows a trader to speculate on changes in the price of a futures contract. This is accomplished by purchasing call or put options.

What is a put option?

The purchase of a put option is a short position, a bet that the underlying futures price will move lower. For example, if one expects soybean futures to move lower, they might buy a soybean put option. 1 Premium: The price the buyer pays and seller receives for an option is the premium. Options are price insurance.