How Does a Futures Contract Differ from an Options Contract?

A futures contract is an agreement to buy or sell an asset at a predetermined price on a specified future date. It creates an obligation for both the buyer and the seller to complete the transaction.

An options contract, however, gives the holder the right, but not the obligation, to buy (call) or sell (put) an underlying asset at a set price before or on a specific date. The key difference lies in the obligation versus the right.