Futures vs Options: What's the Difference?

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Futures and options are both financial instruments used to profit on, or hedge against, the price movement of commodities or other investments. The key difference between the two is that futures require the contract holder to buy the underlying asset on a specific date in the future, while options — as the name implies — give the contract holder the option of whether to execute the contract. That difference has an impact on how futures and options are traded and priced and how investors can use them to make money.

Future- When someone refers to "futures," they're really referring to futures contracts. A futures contract says a contract holder will buy the underlying asset on a certain date regardless of the asset's market price at that time. They agree to a price when they purchase the contract. The underlying asset could be a physical commodity like corn or oil or another financial instrument such as stocks. When you buy a futures contract, your broker won't require you to stake the entire value of the contract. Instead, you'll only have to hold a small percentage of the cash needed for the purchase, which is called an initial margin payment. The price of the contract will fluctuate. If you, as the contract holder, are showing too big of a loss, your broker may require you to deposit more money.

Option- The underlying asset is another financial instrument such as a stock, bond, or even a futures contract. A standard stock option is for 100 shares of the underlying stock. Options for commodities futures use the same standard units as the futures.
When you buy an option, you pay a premium for the option. This is usually just a small amount relative to the strike price of the contract. As an options buyer, this is the most you have at risk. An options contract can never be worth less than $0.