Basics of Futures and Options

Futures and Options are the derivative instrumens, means physical settlement will not be involved. In futures, a contract a signed on the future date. A contract can be buyed by having a margin amount in our account, and after entering into contract on daily basis amount will be credited/debited based on the market price the contract was signed. In options, buyer can have rights to buy/ sell in call/put options respectively. A premium amount needs to be paid to the seller to sign the contract. The buyer can cpont buy or sell the contract whenever they want until the contract expiry date. Upon expiration, the contract becomes invalid. The call/put options can be used as combination to average our risks.