Futures and Options , as the name suggests, is a settlement in which the deal is made on a particular date and the actual settlement is made on a future date. Moreover, in Options, the buyer and seller only have the right to buy or sell, but not the obligation to do so.

  • : A spot market is a market where shares are traded for immediate delivery for cash.
  • : In derivate instruments, the deal is made on a particular day and the original settlement is scheduled for a future day. In this case, the buyer or seller may default or retract his trade on that future day and this is where the exchange comes into focus in ensuring proper settlement.
  • : Margin is the caution deposit to the exchange so that the buyer will not default on a future date. MTM is mark to market which is the difference amount one has to pay to the exchange or get from the exchange as the price fluctuates. Premium is the money given to the seller to sign the contract. Strike price is the predetermined price at which the share is traded. Expiry date is the future date on the settlement is going to be done. Lot size is the minimum number of shares one can trade in futures and options.
  • : In an options contract, the buyer has the option to not buy on expiry date whereas in futures contract, the buyer has to pay the money and take delivery of shares.
  • : The option to buy is called call option and the option to sell is called put option. Premium is decided by the price of the share and time left in the contract.
  • : Futures contract is a contract in which a buyer enters into a contract to buy a particular share on a particular date on a particular price and as per the contract he is supposed to pay the price and take delivery on the expiry date.
  • : A trader needs futures/call/put because he need not pay the entire amount of a lot and he has to pay only a part of it. Moreover, in call and put options, he only has the option, but not the obligation to buy or sell.
  • : It is possible to trade in NIFTY in futures and options.
  • : Physical settlement is one in which seller sells shares in physical form whereas in cash settlement the seller only makes cash settlement.

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