“In Principle an option is a financial instrument that give the holder the right, but not the obligation, to sell (put) or buy (call) another finical instrument at a set price and expiration date (Shapiro, 190).” In this case the financial instrument being spoken of is currency. “Futures are standardized contracts that trade on organized futures markets for specific delivery dates only (Shapiro, 524).” When trading currency we can see two major differences in general futures contracts and options contracts. In an option one has the choice whether or not to exercise that option and it is also has a set price. The futures contract has a set delivery date but does not have the choice to exercise or not. These strategies both are used and sometimes simultaneously to create better exchange rate for the transfer of one currency to another at the most opportune time in order to turn a profit. Options contracts can be traded in an exchange or over the counter. “Exchange traded options are standardized contracts with predetermined exercise price, and standard expiration months which are March June September, and December (Shapiro, 190).” When buying an option a company uses knowledge about current markets and currency rates to determine a good time to make a necessary exchange of currency. They might buy an option for a predetermined duration in hopes that the strike price is profitable for them depending on if they bought a call or a put option. If a put option is bought to sell the currency one would want the strike price to be higher than the price they bought at to give them a positive spread at the time of expiration. However if a company buys a call option to buy, they would want the strike price to be lower than the price of the option so that the spread would favor them. Futures however, are a bit different in strategy and in performance. “A contract for a specific quantity of given currencies, where the exchange rate is fixed at the time the contract is entered into, and the delivery date is set by the board of directors (Shapiro, 184).” When dealing with a normal futures contract the only set parameter is the delivery date but in the currency market an exchange rate is fixed at the time of the contract. This allows corporations to make informed decisions on how long a certain exchange rate will profit them and then purchase a futures contract in accordance with that forecasted information. When a corporation taps into options and futures contract it is because they want to hedge. They might have holdings in certain currencies and at one time or another need to exchange those currencies. With the futures and options market they can try to reduce the exchange rate risk by hedging with these market tools. With the proper research and forecasting profitable exchange rates can be determined in the appropriate amount of time for corporations to realize a gain on there investments.   Works Cited Shapiro, Alan, Sarin Atulya. Foundations of Multinational Financial Management. John Wiley & Sons Inc. Hoboken, New Jersey, 2009.