Options on Futures Contracts

What are known as put and call options are traded on a growing number of commodity contracts. The attraction of buying and trading commodity options is that options make it possible to speculate on increasing or decreasing futures prices with a known and limited risk, which is limited to the premium. The most that the purchaser of an option can lose is the costs of purchasing that option, known as the option "premium" in addition to any transaction costs. There are two types of options, the call and the put. Call option and put options are totally separate and distinct. Buying or selling a call option in no way involves a put option, and buying or selling of a put in no way involves a call.

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