Category Archives: Online Trading

The Difference Between Options and Futures

 

Online Trading has been growing very popular with lots of information and guidance available in the Internet to learn trading quickly and to make quick profits even with a minimal knowledge. Above all, most of the trading firms offer advanced and user friendly interface for online trading.

Options and Futures are two popular product concepts in online trading, to people who are new to trading both may look the same but both have a significant difference.

With options, the buyers have a restricted risk and a huge profit potential as they can place an obligation to buy an asset at the premium they are looking for, hence the name options, on the seller’s part they can’t sell beyond a limit and so their profit is capped and hence they face risk with chances of losses.

With futures, there is more flexibility for the sellers to sell the asset at a future date, with a fixed price of their choice at a future date and same with buyers too, they can buy an asset at a price in a future date and hence the risk is almost even on both sides, with sellers and buyers agreeing upon the price of an underlying asset on a particular day known as settlement day.