Differences between the spot, futures and option market. spot market is deal and settlement made same day. futures and options deal is made one day and settlement another day. in futures both sellers and buyers have obligations to buy and sell. In options there is no obligations to buy and sell. Futures has MTM and caution deposit and options has premium.

  • : spot or cash market is the place where the deal to buy the stocks are made and the settlement are made on the same day unlike the futures contract
  • : exchange is the place where the caution deposit maintained and premium is maintained in futures and options contract. Both Futures and option contracts are dealt in the derivatives market.
  • : margin is not his but the caution deposit which gets deposited in the exchange. MTM is a daily settlement of profit or losses in the futures contract. premium is value which is paid in the options contract by the one who opts for call option or put option. strike price is price in which a derivative contract can be purchased. expiry date is date when the option contract expires. size of the lot can be purchased in the derivative market.
  • : in option contracts whether it is a call option or put option there is no obligation for both buyer and seller whereas in the futures contract there is obligation to buy or sell at the contract price.
  • : call option is a contract where the buyer get the rights to buy but no obligations. put option is a contract in which the buyer get the rights to sell but no obligations
  • : Buyers of this contract has the rights to buy the asset from the seller of this contract and seller of this contract has the rights to sell the asset to the buyer of this contract. agreed price shall be mentioned while signing the contract. cash settlement will be followed. lender balance will be neutralised on Day to day basis, which is nothing but Mark to Market. caution deposit is maintained by the exchange.
  • : from a trader perspective is required prevent them from future price rise due to market fluctuations. further one does not have to pay the for the underlying asset, they can simply deposit a caution deposit or pay for premium too hedge against the price fluctuations.
  • : it is possible to trade in options. on a whole the nifty can be traded.
  • : In case of rice one can get the rice and cash at predetermined price. if in case someone is ready to get cash and buy the commodity locally, they can do that too. former one is called physical settlement and latter is called cash settlement.
  • : What is MTM
  • : who decides the premium and based on what conditions.
1 Comment
  1. Naresh 5 months ago

    In response to your question

    Your Question 1 :: What is MTM?
    MTM in a futures contract is the process of daily settlement of profit and losses arising due to the change in the security’s market value until it is held.

    Your Question 2 :: who decides the premium and based on what conditions.
    Demand and supply ultimately determine the price of options, several factors have a significant impact on option premiums, which are the spot price, exercise price, volatility, time remaining to expiration, rate of interest and so on…

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