An Introduction to Options and Futures

Just a short word on options and futures.  Options and futures are two, broadly similar ways of profiting from a variety of financial markets and these are often used as part of an alternative investment strategy. With options, you can buy an option to buy or sell a set number of something, typically shares, at a fixed price within a certain time. If prices rise or fall in your favour (so that it would be profitable to buy or sell at that agreed fixed price) you will take up that option. If not, you let your option lapse and will simply be out of pocket for the cost of taking up the option.

With futures, you are committed to buying or selling something, usually shares, at a set price at an agreed future date. Clearly, this is riskier than an option as you are committed to that purchase or sale. Much depends on what happens in the market. You could make a lot, or lose a lot. This is a highly geared investment – the risks are high but so are the potential rewards. 


If you are interested in options and futures and want to know more about this and other alternative investments, visit www.alternative-investor.co.uk