Futures and Options – day 3

Two types of trading. Exchange plays the role of mediator in derivative instruments. In Future trading ,the exchange collects the Cause&deposit and Premium from both the buyer and seller. In options exchange will execute the trading of the premium between buyer and seller and once agreed, exchange will take care of daily leveling, but the buyer of the contract do not have any obligations.In option contract the buyer of the call/put option has the rights to buy/sell but do not have any obligation however the seller has to buy/sell if the buyer exercise the contract, where as in Future contracts both the buyer and seller has the rights and obligation to buy/sell the underlying asset.Call option is a contract through which buyer gets the “Rights to Buy” the stocks at the strike price on the expiry date of the contract. Seller signs the contract but do not have any rights on the contract. Buyer do not have any obligations.
Put Option is a contract through which buyer gets the “Right to Sell” the stocks at the strike price on the expiry date of the contract. Seller signs the contract but do not have any rights on the contract. Buyer do not have any obligations. Seller gets the Premium amount for signing the call/put option contract, where the premium is traded between buyer and seller.