Types of options A call is an option to buy A put is an option to sell A European option can be exercised only at the end of its life An American option can be exercised at any time
Nature of Swaps A swap is an agreement to exchange cash flows at specified future times according to certain specified rules Options, Futures, and Other Derivatives, 5th edition 2002 by John C. Hull
Long Short Hedges A long futures hedge is appropriate when you know you will purchase an asset in the future and want to lock in the price A short futures hedge is appropriate when you know you will sell an asset in the future want to lock in the price