What are options and futures trading?

Key Takeaways Options and futures are similar trading products that provide investors with the chance to make money and hedge current investments. 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.

How to understand futures trading?

In order to understand futures trading, you should know what derivatives trading is. Derivatives are financial contracts that derive their value from the price movement of another financial item. The price of a derivative tracks the price of another (i.e. underlying) from which it gets its value.

What are the key numbers for options trading?

For options traders, an option's daily trading volume and open interest are the two key numbers to watch in order to make the most well-informed investment decisions. American options can be exercised any time before the expiration date of the option, while European options can only be exercised on the expiration date or the exercise date.

What is a a futures contract in crypto trading?

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.