What are futures and how are they different from options?
Cart's answer is basically correct, but I'd like to elaborate: A futures contract obligates both the buyer of a contract and the seller of a contract to conduct the underlying transaction (settle) at the agreed-upon future date and price written into the contract. Aside from settlement, the only other way either party can get out of the transaction is to initiate a closing transaction, which means:  The party that sold the contract buys back another similar contract to close his position.  The party that bought the contract can sell the contract on to somebody else. Whereas, an option contract provides the buyer of the option with the choice of completing the transaction.  Because it's a choice, the buyer can choose to walk away from the transaction if the option exercise price is not attractive relative to the underlying stock price at the date written into the contract.  When an option buyer walks away, the option is said to have expired. However – and this is the part I think needs elaboration – the original seller (writer) of the option contract doesn't have a choice.  If a buyer chooses to exercise the option contract the seller wrote, the seller is obligated to conduct the transaction.  In such a case, the seller's option contract is said to have been assigned.  Only if the buyer chooses not to exercise does the seller's obligation go away.  Before the option expires, the option seller can close their position by initiating a closing transaction.  But, the seller can't simply walk away like the option buyer can. For futures, you are obligated to puchase the security at $x when the contract expires.  For an option, you have the right or option to do so if it's favorable to you.
"Technically, anyone who advises how you should spend or proportion your money is a financial adviser.  A person that does it for money is a Financial Advisor (difference in spelling). Financial Advisors are people that basically build, manage, or advise on your portfolio.  They have a little more institutional knowledge on how/where to invest, given your goals, since they do it on a daily basis. They may know a little more than you since, they deal with many different assets: stocks, ETFs, mutual funds, bonds, insurances (home/health/life), REITs, options, futures, LEAPS, etc. There is risk in everything you do, which is why what they propose is generally according to the risk-level you want to assume.  Since you're younger, your risk level could be a little higher, as you approach retirement, your risk level will be lower.  Risk level should be associated with how likely you're able to reacquire your assets if you lose it all as well as, your likelihood to enjoy the fruits from your investments. Financial Advisors are great, however, be careful about them.  Some are payed on commissions, which are given money for investing in packages that they support.  Basically, they could get paid $$ for putting you in a losing situation.  Also be careful because some announce that they are fee-based - these advisers often receive fees as well as commissions.  Basically, associate the term ""commission"" with ""conflict-of-interest"", so you want a fee-only Advisor, which isn't persuaded to steer you wrong. Another thing worth noting is that some trading companies (like e*trade) has financial services that may be free, depending how much money you have with them.  Generally, $50K is on the lower end to get a Financial Advisors.  There has been corruption in the past, where Financial Advisors are only given a limited number of accounts to manage, that means they took the lower-valued ones and basically ran them into the ground, so they could get newer ones from the lot that were hopefully worth more - the larger their portfolio, the more $$ they could make (higher fees or more commissions) and subjectively less work (less accounts to have to deal with), that's subjective, since the spread of the wealth was accross many markets." When you say that you are not sure 'what amount of money would make a difference in the future', it indicates that you have not clearly identified your long term financial goals. Consider monthly budgeting to be one of the stepping stones to long term financial planning. How much you can 'afford' depends not only on your savings and income, but also your future expenses. If you want to buy a house in 2 years, for example, you may want to scrimp and save just a little longer, to secure a larger down payment. If you want to retire early, then similarly saving money now should bring you not short term financial wealth, but long term security. How much you can 'afford' will depend on how your current financial situation matches up with your future goals. The rules of thumb you listed (ie: % of income) may be good starting places, but that doesn't mean they are the right answer for you, in your current situation. "Can anyone explain what each of them mean and how they're different from each other? When you ""buy to open"", you are purchasing an option and opening a new position. When you ""sell to open"", you are creating a brand new options contract and selling it. ""Covered"" means that you have assets in your account to satisfy the terms of the options contract. A ""covered call"" is a call option for which you own shares of the underlying stock that you will sell to the buyer at the option's strike price if he exercises the option. If you previously made a ""sell to open"" trade to create a new position, and you want to close the position, you can buy back the option. If you previously made a ""buy to open"" trade, you can ""sell to close"" which will sell back your option and close your position. In summary:" "Options have legitimate uses as a way of hedging a bet, but in the hands of anyone but an expert they're gambling, not investing. They are EXTREMELY volatile compared to normal stocks, and are one of the best ways to lose your shirt in the stock market yet invented. How options actually work is that you're negotiating a promise that, at some future date or range of dates, they will let you purchase some specific number of shares (call), or they will let you sell them that number of shares (put), at a price specified in the option contract. The price you pay (or are paid) to obtain that contract depends on what the option's seller thinks the stock is likely to be worth when it reaches that date. (Note that if you don't already own the shares needed to back up a put option, you're promising to pay whatever it takes to buy those shares so you can sell them at the agreed upon price.) Note that by definition you're betting directly against experts, as opposed to a normal investment where you're usually trying to ride along with the experts. You are claiming that you can predict the future value of the stock better than they can, and that you will make a profit (on the difference between the value locked in by the option and the actual value at that time) which exceeds the cost of purchasing the option in the first place.  Let me say that again: the option's price will have been set based on an expert's opinion of what the stock is likely to do in that time. If they think that it's really likely to be up $10 per share when the option comes due (really unlikely for a $20 stock!!!), they will try to charge you almost $10 per share to purchase the option at the current price. ""Almost"" because you're giving them a guaranteed profit now and assuming all the risk. If they're less sure it will go up that much, you'll pay less for the option -- but again, you're giving them hard money now and betting that you can predict the probabilities better than they can. Unless you have information that the experts don't have -- in which case you're probably committing insider trading -- this is a very hard bet to win. And it can be extremely misleading, since the price during the option period may cross back and forth over the ""enough that you'll make a profit"" line many times. Until you actually commit to exercising the option or not, that's all imaginary money which may vanish the next minute. Unless you are willing and able to invest pro-level resources in this, you'd probably get better odds in Atlantic City, and definitely get better odds in Las Vegas. If you don't see the sucker at the poker table, he's sitting in your seat. And betting against the guy who designed and is running the game is usually Not a Good Idea." "It's not at all different from anything that happens in reality. Everybody deals with risk and uncertainty, everybody worries about the future, and everybody puts their best mind to bear on it. You gamble, you hedge your bets, you try to do your best with what you've got and what you're willing to give up. People who aren't in the financial industry can also think about their goals in a fine-tuned, strategic, mathematical way. Being able to accurately model reality is useful for pretty much everything.  The way in which it is actually totally different is not addressed. People who deal in derivatives can do a very precise job of predicting the future. So can astronomers, bullfighters, and migratory fish. The difference is that people who deal in derivatives have the ability to leverage reality to obtain a preferred future reality in a uniquely influential way. The guy is acting like investment banks live up on a mountain and look at tea leaves and send down memos about securities once a year.   &gt;Changing the shape of the graph is in some loose sense the business of the financial system, particularly the big investment banks, which are sometimes thought of as ""dealers in risk.""   So are drug dealers. But the guesses investment banks make about the future affect the actual future of investment banks in a way that isn't available to, say, cobblers, so they are dealing with much less of their own risk than most people.   &gt;Buying and selling derivatives means consciously trafficking in risk and uncertainty, in a relatively uncut form. This makes it interesting to people who don't buy or sell derivatives for a living, but who are curious about risk and uncertainty.  It also makes it interesting to people who are curious about why their lives are affected by the the risk and uncertainty of people who trade in derivatives." -I understand. If the option expires and you paid a premium of let's say $20, then you loose it. I will still have to read more obviously. If there are other ways to play the commodities market in a safer way, I am more than willing to look into it. -I understand futures and options on futures are more risky than stocks. What I am getting at is it is less risky COMPARED to regular futures. Compared to the available choices, this seems like the safest. I understand I can loose all the money I invest/speculate with. But loosing $10 (or whatever the price of said commodity options are), is still better than loosing thousands. I agree though I should do my do diligence. -What I am getting at is obviously certain things are correlated with bull or bear markets (gold bear, growth stocks bull). If you can use a combination of assets, you can have some that are winners, while some will be down. I don't expect one asset to be a super asset. -But most the stocks are overvalued, and are overrated. I have found several stocks that I am invested in (MGM Macau, Lippo Mall, and Whiting Trust II). I am also in gold, silver, small Riyal position, and Norwegian Kroner. Short answer: Liquidity. Well, you have to see it from an exchange's point of view.  Every contract they put up is a liability to them.  You have to allocate resources for the order book, the matching engine, the clearing, etc.  But only if the contract is actually trading they start earning (the big) money. Now for every new expiry they engage a long term commitment and it might take years for an option chain to be widely accepted (and hence before they're profitable).  Compare the volumes and open interests of big chains versus the weeklies and you'll find that weeklies can still be considered illiquid compared to their monthly cousins. Having said that, like many things, this is just a question of demand.  If there's a strong urge to trade July weeklies one day, there will be an option chain.  But, personally I think, as long as there are the summer doldrums there will be no rush to ask for Jul and Aug chains. Futures exchanges are essentially auction houses facilitating a two-way auction. While they provide a venue for buyers and sellers to come together and transact (be that a physical venue such as a pit at the CME or an electronic network such as Globex), they don't actively seek out or find buyers and sellers to pair them together. The exchanges enable this process through an order book. As a futures trader you may submit one of two types of order to an exchange: Market Order - this is sent to the exchange and is filled immediately by being paired with a limit order.   Limit Order - this is placed on the books of the exchange at the price you specify. If other participants enter opposing market orders at this price, then their market order will be paired with your limit order. In your example, trader B wishes to close his long position. To do this he may enter a market sell order, which will immediately close his position at the lowest possible buy limit price, or he may enter a limit sell order, specifying the price at or above which he is willing to sell. In the case of the limit order, he will only sell and successfully close his position if his order becomes the lowest sell order on the book. All this may be a lot easier to understand by looking at a visual image of an order book such as the one given in the explanation that I have published here: Stop Orders for Futures Finally, not that as far as the exchange is concerned, there is no difference between an order to open and an order to close a position. They're all just 'buy' or 'sell' orders. Whether they cause you to reduce/exit a position or increase/establish a position is relative to the position you currently hold; if you're flat a buy order establishes a new position, if you're short it closes your position and leaves you flat.