Futures and options are two types of derivatives. Their structure and the way they work are complicated, and involve leverage. They are high risk and not suitable for inexperienced investors or people who are less risk tolerant.
Futures are financial contracts for underlying assets, such as stock, market index, currency or commodity. The underlying assets are bought or sold at an agreed price today, for a set date in the future.
You can trade futures on the HKEx. You can buy or sell them with a margin deposit, which only partly covers the value of the contract. Going into leverage can increase the size of your gain or loss. Trading futures can be risky as a broker can make a margin call. This means you must put in more cash or securities to cover the shortfall of your margin deposit in case the price of the underlying asset moves against your view. The loss could be much more than your margin deposit.
Options are financial contracts that give the buyer the right to buy or sell an underlying asset (stock, market index, currency or commodity) from the seller at a set price within a certain time.
You can trade options on the HKEx. The risks and returns of the option buyer and seller are different. If you are the buyer, the maximum loss is the premium you pay to the seller. If you are the seller, you get the premium. But you must also make a deposit as a guarantee to go ahead to buy or sell the underlying asset. Like futures trading, the option seller faces the risk of a margin call. Again, the loss for the seller could be much more than the premium.
Learn more about futures and options in the following sections.