Can you trade futures options?

Before you can trade futures options, it is important to understand the basics. 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.

What is the difference between an option and a futures contract?

An option gives the buyer the right, but not the obligation, to buy (or sell) an asset at a specific price at any time during the life of the contract. A futures contract obligates the buyer to purchase a specific asset, and the seller to sell and deliver that asset, at a specific future date.

Why are options more illiquid than futures?

Futures (esp. commodities, currencies and indexes) are traded in huge numbers every day so investors can get in and out more faster and cheaper. Options can be more illiquid, especially if the underlying asset is far away from the option’s strike price or the option expires far into the future.

What is options trading?

Options trading isthe practice of buying or selling options contracts. These contracts are agreements that give the holder the choice to buy or sell a collection of underlying securities at a set price by a specific date. Investors can, but don't have to, own the underlying security to purchase or sell an option.