In futures market, profit will be realized on a day to day basis. It provides an opportunity for short trades to be placed which cannot be placed in equity market.
A Call option gives the right to buy to the buyer.
A put option gives the rights to sell to the buyer.
What is Spot / Cash market?: A spot market is also known as the equity market. It is called equity because all the shares are equal in nature.
What is the role of exchange in derivative instruments?: The exchange acts as the middleman in derivative market making. It collects a caution deposit and makes sure trades are happening in a fair manner.
What are Margin / MTM / Premium / Strike Price / Expiry Date / lot size?: Buying on margin is borrowing money from a broker to purchase stock. MTM is a way to evaluate the current position and determining profit and loss. A strike price is used in a call and put option, which simply determines the price at which the contract becomes active. Expiry date is the date when the contract expires Lot size – The no. of shares we buy in one transaction
How option contract differ from future contract?: In a future contract, both the buyer and seller have rights to buy/sell. A buyer of CALL option has rights to buy, but no obligations. A seller of CALL option gives rights to the buyer. He has obligations but no rights. A buyer of PUT option gets the rights to sell, but no obligations.
What is call option and put option? Who decide the premium?: Call option – Buyer gets rights to buy but no obligations Put option – Buyer gets rights to sell but no obligations The buyer and seller decide the premium.
What is Futures contract?: A futures contract is