Futures option is the right to buy and sell futures contracts, including commodity futures options and financial futures options. Generally speaking, options usually refer to spot options and futures options refer to "options for futures contracts". A futures option contract refers to a futures contract that buys or sells a certain number of specific commodities or assets at an agreed price on or before the expiration date of the option. Futures options are based on commodity futures contracts. When the futures option contract is implemented, it is not the commodity represented by the futures contract, but the futures contract itself. If the futures call option is exercised, the holder will get the long position of the futures contract plus the cash amount, which is equal to the current futures settlement price minus the exercise price.

The advantage is that

(1) Efficient use of funds. Because the commodities traded are futures, the main agricultural futures options are established when the positions are opened.

In this sense, futures options can complete transactions with less funds, thus improving the efficiency of the use of funds.

(2) the transaction is convenient. Because the commodities traded in futures options have been standardized and unified, with high liquidity and convenient trading.

(3) Low credit risk. Because futures options trading is usually carried out in the exchange, the counterparty is the settlement institution of the exchange, so the credit risk is small.

Compared with spot options, futures options also have obvious disadvantages. The biggest disadvantage is that because it is traded on the exchange, the types of listed goods are limited, and it is impossible to freely decide the trading conditions such as the agreed price and term. As far as the advantages are concerned, if traders use futures options when hedging or investing in the futures market, it will reduce the risks in the futures market, improve the success rate of hedging in the spot market and increase the profit opportunities.