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What is Futures Options Trading?

Written by FuturesOptionsTrading.net
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Learn why trading futures is one of the fastest and most exciting ways to trade online.
Futures options refer to a trading platform that allows people to bet on the price rise/ fall of futures contracts. Future options give the buyers the right to sell or buy the futures before the trading period expires. Futures/ futures contract refers to a contract that binds people to a future purchase/ sale of commodities/ assets, but at a price that is set at the time of drawing the contract. Options trading refer to a trade that allows people to predict the increase/ fall of a commodity/ futures price, thereby winning them (traders) money when their predictions come true or losing money when their predictions turn out wrong.

About futures trading

A buyer can agree to buy an asset/ commodity from a seller at an agreed price, but at a future date. In this agreement, the buyer and the seller each carry a certain risk. If the price of the referenced commodity, in the futures contract, is higher than the predicted price, the buyer gets the commodity at a lower-than-market value price whereas the seller loses out on the additional income. If the price of the referenced commodity falls below the agreed price, the buyer buys the commodity at a higher-than-market value whereas the seller gets more profit than he would have made selling his commodities at market value.

About future options, binary options and binary futures

Binary options are trading platforms that allow the prediction of an increase or decrease in the price of the underlying commodity by traders; a correct prediction earns a trader money whereas a wrong prediction loses him (the trader) money. Future options have futures contracts as the underlying trade contracts/ assets instead of actual commodities. In binary futures, traders can call (predict a price increase) or put (predict a price decrease) on futures. Traders reserve the right to buy or sell their futures before the futures trading period expires.

Conclusion

Futures options let people bet on the increase or decrease of the price of their futures contracts while allowing them to sell/ buy those futures before the trading period expires. A call on futures predicts the increase of the futures prices, whereas a put predicts the decrease of the future prices. A correct prediction, at the end of the trading period, wins a trader money.

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