Futures and Options are the derivative instruments available for trading on stock markets. The exchange provides these instruments for trading and also plays key role in ensuring that these trades are settled in cash or in physical delivery.
The Futures provide leverage to the trader over their trading capital. While futures provides a right to buy/sell stock on expiry date to the buyer and seller, it also makes this contract binding on both the parties.
Options provide a trading instrument to the buyer with capped risk in case the stock moves in opposite direction. The sellers risk in option is unlimited and they get a premium in return for selling options. The options can be Call giving buyer right to buy stock or Put giving right to sell stocks at strike price.
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