A futures contract commits both sides to settle a trade at an agreed price. An option gives its buyer the right to buy or sell an asset at a set price, in return for a premium.
That changes how you fund a trade and how much you can lose. It also changes what counts as a successful forecast: a small price move can earn money on a futures position yet leave an option buyer with a loss.
These examples use conventional futures and call and put options. Binary options, digital options and futures-linked CFDs have different contract terms and payout rules.
Futures vs options at a glance
The table compares futures with buying a call or put and paying the full premium. Selling a new option—also called writing one—creates different obligations.
Contract comparison
Futures vs buying an option
| Feature | FuturesAn obligationBoth sides commit to settlement unless the position is closed first. | Buying an optionA rightThe buyer chooses whether to exercise, subject to the contract’s rules. |
|---|---|---|
| Upfront payment | Margin depositCollateral to support the position. | Premium paid in fullThe price of the option. |
| Risk on the position | Losses can exceed the margin you deposit. | The option can lose its full premium, plus fees. Exercise may create further exposure. |
| Price sensitivity | Each point of futures price movement has a fixed cash value per contract. | The option price responds to the underlying price, time remaining and volatility. |
| Effect of time | Fixed expiry. No option-style time decay. | Fixed expiry. Time value generally falls as expiry approaches, all else equal. |
| At expiry | Cash settlement or delivery, depending on the contract. | Cash, shares or a futures position, depending on the contract. |
How futures and options work
Futures follow changes in the contract price
A futures contract sets the market, contract size and settlement date. A long position gains when the futures price rises. A short position gains when it falls. Each loses when the price moves the other way.
You can usually close the position before expiry by taking the opposite trade in the same contract.
For a long position, the basic calculation is:
Futures P/L = (exit price − entry price) × contract multiplier × number of contracts
The multiplier tells you what a price move is worth. At $10 per point, a two-point move means a $20 gain or loss on one contract, before costs. Check the multiplier before placing a trade. You’ll find more on contract sizes in the futures guide.
Options add a strike price and a premium
A call gives its buyer the right to buy an asset at an agreed price. A put gives the right to sell. That agreed price is the strike. The cost of the option is its premium.
Some contracts settle in cash instead of transferring the asset.
At expiry, a call has value if the settlement price is above the strike. A put has value if it is below. Otherwise, the option expires worthless and the buyer loses the premium. Having value is not the same as making a profit: you still need to recover what you paid.
You can also sell an option before expiry. Its price then depends on time remaining and market conditions. The options guide explains calls and puts in more detail.
Futures vs options: one market, two results
Suppose you expect an index to rise. Compare one long futures contract with one long call in a hypothetical market:
- Futures entry price: 100 points.
- Call strike: 100 points.
- Call premium: 4 points.
- Multiplier for each contract: $10 per point.
- Both contracts settle in cash against the same index value on the same date.
The call costs 4 × $10 = $40. These are made-up figures, not live quotes or IQ Option contract terms. For now, leave out fees and financing. Assume you have enough cash to keep the futures trade open until settlement.
For this one-contract example:
Long futures P/L = (final index value − 100) × $10
Long call P/L = [max(final index value − 100, 0) − 4] × $10
The max part keeps the call’s settlement value at zero when the index finishes at or below 100. Then subtract the premium to find your profit or loss.
Worked example
Profit and loss at expiry
- Futures entry
- 100 points
- Call strike
- 100 points
- Call premium
- 4 points / $40
- Each multiplier
- $10 per point
If the index finishes at 102The call’s $20 settlement value doesn’t recover its $40 premium.
- Long futures P/L
- +$20
- Long call P/L
- −$20
View settlement outcomes
| Final index | Futures | Long call |
|---|---|---|
| 90 | −$100 | −$40 |
| 100 | $0 | −$40 |
| 102 | +$20 | −$20 |
| 104 | +$40 | $0 |
| 110 | +$100 | +$60 |
| 120 | +$200 | +$160 |
At 102, you were right about the direction. The futures trade gains $20. But the call loses $20: its $20 settlement value doesn’t cover the $40 you paid. Both results exclude fees.
At 90, the futures position loses $100. The call loses $40. Below the strike, further declines do not increase the loss on this cash-settled long call.
The call’s expiry break-even is 104, calculated as strike plus premium in points. A put’s expiry break-even is strike minus premium. Fees move both break-even levels further against the buyer.
Both contracts use $10 per point, but their prices won’t move in step before expiry. The call’s sensitivity changes with price, time and volatility. One option contract doesn’t give you the same exposure as one futures contract.
Margin vs premium: what you pay
Margin is money your broker requires to support a futures position. It isn’t a loss limit. A premium is the price you pay for an option: $40 in our example.
For the futures example, assume the broker requires:
- $150 initial margin to open the trade.
- $120 maintenance margin to keep it open.
You start with $150. The futures price falls from 100 to 96, producing a $40 loss. Your balance drops to $110, below the $120 minimum. To bring it back to $150, you need to add $40. This assumes no other positions, fees or changes to the margin requirement.
Futures account example
Margin after a four-point drop
- Initial margin
- $150
- Maintenance margin
- $120
- Futures price
- 100 → 96
- Multiplier
- $10 per point
$150 starting balance − $40 loss
The balance is $10 below maintenance. Restoring it to the assumed $150 initial margin requires $40.
$150 − $110 = $40
Actual margin requirements vary. A broker may close the trade without waiting for you to add money. A low advertised margin tells you how much you need to open a position, not how much you need to withstand losses.
Futures gains and losses move in and out of your account through daily settlement. You may also need to add money during the day.
So the market could reach your target after an earlier loss has already forced you out. The payoff chart assumes you can keep the position open.
Why an option can lose when your forecast is right
Being right about direction is only one part of buying an option. The size and timing of the move matter too.
Suppose you buy a call for 4 points, or $40 with the same multiplier. The underlying price rises, but the option’s resale price drops to 3 points before expiry. You sell it for $30 and lose $10 before fees.
Time and expected volatility also affect option pricing:
- The move comes too slowly. An option loses time value as expiry approaches, all else equal. A small price rise may not make up for that loss.
- An expected event passes. Traders may pay more for an option ahead of earnings or other news. After the event, they may expect less volatility. The premium can fall even if the price moves in the expected direction.
You can also sell an option for a profit before the underlying reaches its expiry break-even. For an early exit, compare what you paid with what you can sell it for. The expiry chart doesn’t show that resale price.
Futures don’t have option-style time decay. But the contract month, financing, dividends or storage costs can affect their price. Keeping a position open—or moving it to a later contract—can still cost money.
What happens at expiry
A futures contract can end in cash settlement or physical delivery. Check which applies, the last trading day and your broker’s deadline. If you want to close the trade or move it to a later contract, plan that before expiry. Don’t assume the broker will do it for you. CME explains both methods in its settlement guide.
For options, exercise means using the right the contract gives you. Check when you can do it and what you’ll receive:
- American-style options can generally be exercised before expiry as well as at expiry.
- European-style options can be exercised only at the specified expiry time.
- Settlement may produce cash, shares or a futures position, depending on the contract.
If exercise leaves you holding shares or a futures position, you’ll need to fund and manage that new position. Its losses aren’t capped at the option premium. Check your broker’s deadlines and whether exercise happens automatically; the OIC explains the process in its exercise guide.
What does each trade cost?
Compare the costs over the same holding period. Keep the futures margin deposit separate from trading fees.
For futures, count the spread, commissions, exchange or clearing fees, and any data charges. Moving to a later contract means closing one trade and opening another, which adds transaction costs. You also need cash to cover losses and margin changes.
For bought options, count the premium, spread, commissions and any exercise or settlement fees. Some strikes and expiries are harder to trade than others. You may not get the midpoint between the displayed buy and sell quotes.
Now add $6 in total charges to each trade in our example. If the index finishes at 110:
- Futures: $100 − $6 = $94 profit.
- Call: $60 − $6 = $54 profit.
The call’s $60 result already includes the premium. Don’t subtract it twice.
How to choose between futures and options
Suppose you expect the contract price to move from 100 to 102 and plan to close there. In our example, the futures trade earns $20 before costs. Closing at 98 instead loses $20. Each point has the same $10 effect, so the calculation is straightforward. But you need enough cash to fund losses along the way. A stop order helps you plan an exit; it doesn’t guarantee the price you’ll get.
Now suppose $40 plus fees is all you’re willing to lose, and you accept losing that whole amount if the trade doesn’t work. The cash-settled call in our example fits that limit. The trade-off is that a small rise may not recover the premium. If you hold it to expiry, the index must finish above 104 to make a profit before fees.
Selling a new option changes the risk. The premium you collect doesn’t cap your loss. An uncovered short call, for example, can have theoretically unlimited losses.
Before opening either trade, answer four questions:
- What does one contract represent? Convert a one-point move into money.
- What happens if the market moves against me first? Calculate the cash needed to maintain or close the position.
- When must the idea work? Match the holding period with the contract’s expiry and costs.
- What happens if I do nothing at expiry? Identify the resulting cash payment, delivery or new position.
The risk-management guide can help turn those answers into a position-size and exit plan.
