Importance and Working of Derivatives Market.

Derivative instruments are Call and Put Options. In call options the buyer who thinks that the price will go up will buy an Call option without any obligation do buy it during settlement. If a person thinks that the share price will fall then he will buy the rights to sell the shares or in other words he will buy a Put option. Here also he is not obligated to sell. The seller of
Call and Put options will charge a premium for having entered into a contract for Call and Put option. This premium is charged on the basis of demand and supply.