Futures and options are important for hedging or managing different kinds of risks.
Traders use it for their advantage as they have to pay only the premium ,but it can be risky if done without knowledge

  • : its a market where securities are traded for immediate delivery
  • : Role of exchange is to ensure fair and orderly trading and providing correct price information for any securities trading on that exchange
  • : Margin- the money borrowed from the broker to buy securities. MTM- Mark to market, asset values are determined according to market price at the end of the day , the profit and loss are adjusted daily in future contract Premium-It is the money which buyer is ready to pay for seller to sign the contract Strike price-the price at which we can buy or sell the stock if we choose to exercise the option Expiration date- the date at which option contracts expire Lot size- Its a fixed quantity of units to buy in one transaction
  • : Future contract holder is required to take the ownership of the underlying asset and price is determined by the current market price and is less volatile. Option contract Holder has the right but no obligation to buy the underlying asset . Price is specified in the contract , it is very volatile. There is time decay in option contract
  • : Cal option gives a trader the right to buy a sock and put option gives a trader the right to sell the stock. Option premium is decided based on 3 parameters - the underlying stock price in relation to strike price, time at which the option expires and volatility
  • : Its a contract between 2 parties where they agree to buy or sell a particular asset of specific quantity at a predetermined price on a specific date in the future
  • : We don't have to spend money on the underlying asset , we only need to pay an initial margin to trade . They help hedge against price fluctuation
  • : yes, through options and futures and mutual fund
  • : In cash settlement ,the seller in the contract choose to transfer the net cash instead of delivering the underlying asset In physical settlement the seller opts to go for the actual delivery of the underlying asset

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