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what's the difference between options and futures?

Monday, Apr 15 2019 8:50AM

What's The Difference Between Options And Futures?
An option gives the buyer the right, but not the obligation, to buy or sell a certain asset at a set price during the life of the contract.A futures contract gives the buyer the obligation to buy a certain asset. The seller has the obligation to sell and deliver the asset on a future date. Buying an option requires a premium. The premium is the most he can lose. Entering into a futures contract requires no upfront cost aside from commissions. The underlying position in a futures contract is generally much larger than it is in options. The obligation to buy or sell at a given price makes futures contracts more risky. The gain on an option can be realized by exercising the option when it’s deep in the money; taking the opposite position in the market; or waiting until it expires and collecting the difference between the asset price and strike price. Gains on futures update daily to reflect current fair market value. But a futures holder can also realize gains by taking the opposite position in the market.

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