The primary difference lies in the obligation placed on the contract buyers and sellers.
In a futures contract,
both participants in the contract are obliged to buy (or sell) the
underlying asset at the specified price on settlement day. As a result,
both buyers and sellers of futures contracts face the same amount of
On the other hand, the option contract buyer has the right but not
the obligation to buy (or sell) the underlying asset. Hence the term
"option" and this option comes at a price in the form of a premium
(more specifically, the time value of the premium). With this "option",
the option buyer's risk is limited to the premium paid but his
potential profit is unlimited.
Sellers of options take on an additional volatility risk in exchange
for the premium. However, their potential profit is then capped while
their potential losses has no limit. Hence, this premium can be high if
the underlying asset is perceived to be very volatile.