An option is a contract between two parties to either buy or sell an underlying security at a specified strike price at a designated expiration date. Options expire around the 15th of each month. Futures are essentially commodities. Sugar, pot bellies, corn, oil etc. You buy a contract to purchase a specified amount of a commodity with the expectation that the future price will be greater at the expiration of your contract. That is, unless you are shorting the position, but that's for another day. Hedging is using a variety of techniques to minimize risk and lower losses should a position take a direction you did not anticipate.