As for the risk, when you buy an option contract, you own nothing but the right to buy or sell in the future. If the stock doesn't move in the right direction, your option contract will expire worthless. The reward for taking this risk as that you get control of a greater amount of shares per dollar than you would if you bought or sold.
an example:
XYZ Inc. Stock is $50 and you think it will be $60 by October. You have $5000 to speculate with.
You could buy 100 shares at $50 each of XYZ and if you are right, you will make $1000.
You could buy ~500 calls for XYZ with an exercise price of $40 at about ~$10 each. If you are right, you will make $5000.
If the stock goes down to $40 on the other hand, scenario 1 will give you a $1000 loss and scenario 2 will wipe you out.