spot/cash market: ownership of assets transfer immediately after a buy or sell transaction.
The derivatives play vital functions like risk reduction through hedging, ensuring market efficiency, deal price discovery of the underlying asset, etc. The derivatives clearing house guarantees that traders meet their obligations.
Strike price: The price at which the buyer of an option can buy the stock (in the case of a call option) or sell the stock (in the case of a put option) on or before the expiry date of option contracts is called strike price.
A futures contract is a legally binding contract to buy or sell securities on a future specified date .
An option gives the buyer the right, but not the obligation, to buy (or sell) a certain asset at a specific price at any time during the life of the contract.
cash settlement is for futures contract that has non-physical asset as underlying asset.
Physical settlement: Under this arrangement, the actual delivery of asset takes place, which is to be delivered on the specified delivery date