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An options contract is basically a futures contract split into two parts.
Examine the futures graph again and see that the futures contract value and the underlying security have a linear correlation behaviour. This means that buying a futures contract will benefit the buyer if the underlying security rises in a reasonable time interval. The opposite will happen; if the underlying security drops, the futures buyer will lose money.
The two contract parts of the future contract are the options contracts.
One part for each direction of the underlying contract one part that will benefit from the rise of the underlying security and the other part will benefit from a decline of the underlying security. By breaking the futures contract to two contracts, new variables are added to these contracts. Compared with the future contract’s value that has linear variables such as time value and underlying security, the options value has nonlinear variables.
Options variables are:
1. Time value; this value calculation expressed in the previous subject on futures.
2. Time to expiration; at the end of this time the contract expires if it is not exercised. There are two primary exercise styles one is the European-style exercise, which means that the option can be exercised only on its expiration day. In some cases, the expiration could occur during that day, in other cases the exercise only when option has expired. The second style of exercise is the American-style exercise. Such an option you can exercise on any day through the expiration day.
3. Uncertainty (implied volatility, will be discussed later on.) The difference between the strike price (exercise price or strike, is the settlement price of the contract, a reference to a calculations of the options value.). Options premium (or just premium) is the money paid when contract initiated. Settlement can be in physical delivery or cash.
Types of options:
Financial options have underlying securities such as stock options, index options, ETF options, interest rate options, bond options, and currency options. Other groups of options are the options on futures and commodity options.
Because of the nonlinearity and variability of an options contract, there are endless possibilities to deal with risk / reward management and customize activity according to market conditions. Options are also called derivatives; intuitively, it is because the value of the contract is derived from its underline demeanor. Options are traded wherever the futures are traded. There are options on futures and options on underlying securities.
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Fundamentals 
