Let's use an example. Say, you came to the store to buy some vegetables and suddenly saw the audio system of your dreams. Now, in the perfect world you would just take it. But in the real world you a) have no money at the moment and b) have a spouse that must approve first.

So you are asking the store owner to hold the audio system and not to sell it to anyone until you go home, resolve the real world problems and return with money. And the store owner says "no".

Because from his point of view it is a financial risk you are asking him to take. What if the real world problems will not be resolved? What if you will not come back with money?

And then you are bribing him. Here. Take this twenty dollars. If I come back, you count this money as part of the payment. And if you don't? - the store owner still isn't sure that it isn't a trick. - And if not, you keep this money.

OK, the store owner says. For this money the audio system will be "on hold" for one day.

That's it. For a small (or large) deposit you just bought yourself an option (a right) to buy the audio system

There are few benefits in using options trading or similar techniques. The reason described above (I have no money but I expect to have them) is not the most important one.

You can use options to guarantee the price of a purchase. Say, you are buying a house. And the price is 100,000 and naturally you don't have them. But you are sure that you can - if you go to your bank and take a loan. But what if the moment you leave, the other guy walks in and offers 120,000?

To avoid this situation you can offer the house owner to SELL YOU an option to buy this house within some fixed period of time (day, week, month, 6 month) for some amount of money (one dollar, 200 dollars, 1,000 dollars). You put it in writing and your price is GUARANTEED.

And then the real estate market goes down and the house is now $90,000... So you can abandon the option - you don't have to buy anything! Or better - you can make another offer to the same seller!

So it is a technique to profit from the price moves with the little risk! Think about the house example above. If you expect that the real estate market is about to go up, you would like to buy a house NOW. But if the market go down instead - you loose a lot of money. However if instead of buying the $100,000 house you buy the $1000 option... You will loose much less and you will win (if price go up) the same

No. Not the same. Say, the house price went up from 100,000 to 120,000 dollars. The profit is 20,000 and it means 20% if you paid 100,000 dollars. OR if you only paid $1000 for the option, then it will be 2,000 percent!