One of the most common questions a futures broker gets is, “How do options on futures work?” The truth is, options can be as simple or complex as you want them to be. This vide will focus on the basics of buying options on futures, basically starting from scratch, but using the Russell 2000 Index to do so.
There are two types of options, calls and puts. The options can either be bought or sold. We will only focus on buying options in this video below. Buying a call gives you the right to take a long position on the underlying futures contract. Buying a put gives you the right to take a short position on the underlying futures contract. Simply stated, when you think the market will go up, buy a call. When you think the market will go down, buy a put.
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