With the advent of options on futures contracts comes speculation opportunities never before available to the investor. Many of these strategies greatly limit risk while still allowing the opportunity for large profits, as in futures. Option profits accrue more slowly than futures and in many cases profits are limited while the potential risk is unlimited.
Options are straightforward to understand.
However, they are relatively new and take effort to comprehend. For this reason, many investors are choosing to stay away. This gives the trader who is willing to do a little work a great advantage. For example, an option on a piece of property gives the buyer the right, but not the obligation, to purchase the property during a stated period of time at a stipulated price. If the buyer decides to exercise his option to purchase, the seller is obligated to turn over the property at the agreed upon price.