Bond futures contracts are employed as a method to speculate on interest rate changes. A view that interest rates will fall (and bond prices will rise) will be expressed by buying bond futures contracts. Conversely a view that interest rates will rise will be expressed by selling bond futures contracts. A fund manager may also use bond futures contracts to hedge interest rate risk by selling a bond future against a specific asset, or to express a view on the relationship between interest rates of different maturities or currencies.
For example, a view that 5 year interest rates would rise by more that 30 year interest rates could be expressed by selling 5 year bond futures and buying 30 year bond futures. A view that US interest rates would rise by more than UK interest rates could be expressed by selling Treasury (US) bond futures and buying gilt (UK) bond futures.
Options allow for more refined views on how much the market might move in either direction. The effect (negative or positive) of the market moving in the manager's favour or against him, can be greater than it would have been if he owned the underlying security.
For example, if the manager feels that the US dollar is going to weaken against the yen, he could buy a 'put' option, ie an option to sell the US dollar at a specified price in the future (a 'call' option would confer the right to buy). If the dollar did indeed weaken and the manager had an option to sell it at a higher level, then he would be 'in the money' and could sell the option for a much greater price than he had paid for it. If the dollar did not weaken by the time the option expired, then the option would be worthless and the manager could simply take the loss of the price paid for that option, known as the premium.
It should be noted that whilst the above example shows an unlimited gain and a limited loss, there are also cases of futures and options trades where the loss can be unlimited.