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1. Forget about craps. There's no comparison apart from the gambling aspect.

"Futures" are like "options" without the option part. That is, with a futures contract, the "buyer" and the "seller" are both obligated to physically realize the transaction on the designated settlement date.

Wiki has a good explanation of options.

Options are financial instruments that convey the right, but not the obligation, to engage in a future transaction on some underlying security, or in a futures contract. In other words, the holder does not have to exercise this right, unlike a forward or future. For example, buying a call option provides the right to buy a specified quantity of a security at a set strike price at some time on or before expiration, while buying a put option provides the right to sell. Upon the option holder's choice to exercise the option, the party who sold, or wrote, the option must fulfill the terms of the contract.
http://en.wikipedia.org/wiki/Option_(finance)

Options allow an investor to pay a premium (a fraction of the underlying price of the security or commodity) in order to have the option to a) buy or b) sell that security or commodity at a given future date.

So, instead of buying 1000 shares of Microsoft stock at todays price of, say $30, you might decide to use just a part of your $30,000 to purchase the option to buy (call option) 10,000 shares at, say, $32, at any time from now to three months in the future. The premium is non-refundable - a fee paid in return for the option.

If the stock price remains, or ends up, under $32, it would obviously be less than worthless to you (you're not going to exercise your option to buy stock at $32 when that stock is trading at less than $32 on the open market). In this case, you'd just let your option expire and check the fee you paid for that option up as a loss.

If, however, the stock goes to, say, $34, you would exercise your option to buy the 10,000 shares at $32. You wouldn't have to put up the $320,000 to buy the stock, then sell it at $340,000. It's all done on paper. Basically, you'd just "win" the difference of 10,000 x $2 = $20,000. And you'd have gained that amount (having controlled $320,000 worth of stock) in exchange for a much lower risk.

A put option is the opposite, in that you purchase the option to sell a given security of commodity, at a given price, before or at given time in the future.

A put option on the 10,000 shares mentioned above would "win" you $10,000 for evey dollar its price ended up under $32. If the stock rose above $32, you'd let the option to sell expire and "lose" the premium you paid for having had that option open to you (you're not going to sell stock at $32 which is now worth, say, $34 on the open market).

The downside is that you are more exposed (you have a time limit on your option) than you would be if you owned the security outright.

The difference between a "future" and an "option" is that the future is not optional - buyer have to buy and sellers have to sell AT the settlement date.

Wiki Futures contract

In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price...

To minimize credit risk to the exchange, traders must post margin or a performance bond, typically 5%-15% of the contract's value. Margin requirements are waived or reduced in some cases for hedgers who have physical ownership of the covered commodity or spread traders who have offsetting contracts balancing the position.
http://en.wikipedia.org/wiki/Futures_contract

So, the option purchaser is limited in his risk to the tune of what he paid for the option, while the futures investor's risk is virtually unlimited.

You may also purchase options on futures contracts.

Clear?