Benefits Of Futures Over Options


Options and futures are derivative instruments.  They both derive their value from a particular underlying instrument or asset. They both have pros and cons. One of the advantages of dealing with option is that it offers the buyer the right to sell or buy the financial instrument and not an obligation to buy or sell on or before the pre-determined date.  The maximum risk the buyer will face in an option is just limited to the premium amount paid by him.

However, the futures have some significant benefits over the options.  A futures contract is an agreement entered between the buyer and seller to sell or buy a financial instrument or an asset at a fixed price at a pre-determined date. If you are not an expert in trading securities and still not clear about all the aspects of trading but still you would like to trade you can use the service of various online platforms like This Site These types of software’s give guidance with regard to when to buy and sell securities. Listed below are the few benefits of futures over the options:

Futures are best for a trading certain type of investments- Future is a great way to conduct trading of currencies, commodities, indexes, etc.  Their standardized features and the choice of leverage make the ideal choice for a risk-tolerant investor.

Fixed trading costs- The requirements for margin for major currencies and commodities have been unchanged relatively for years. The margin requirements will be raised temporarily for a period when the asset is volatile. It will be unchanged for at least one year usually. Hence the trader is aware of how much he needs to put as initial margin.

Liquidity- This is another benefit that futures have over options. Most of the futures markets are liquid and deep, especially in the case of commodities, indexes and currencies that are traded commonly.   These results in narrow bid-ask spreads. It reassures the traders they could enter or exit the position whenever required.   On the other hand, options do not have sufficient liquidity.

No time decay- Options are like wasting assets as its value decline with the passage of time. This phenomenon is called as time decay.  The options trader has to be very much cautious about time decay as it can change the winning position into the losing option. On the other hand, the traders who conduct futures trading do not have to worry about time decay.