Future and options are part of derivative markets. The term “derivatives” is used to refer to financial instruments which derive their value from some underlying assets. The underlying assets could be equities currencies, and even indices of these various assets, such as the Nifty 50 Index.
NIFTY 50 and Bank Nifty are popular index derivatives in India. Stock derivatives, currency and commodities are also traded in derivative markets in India.
Derivatives are used by traders mainly for hedging purposes. It makes possible for a trader to effectively plan their risk vs rewards of a trade.
Derivative markets are regularised and standardised by stock exchanges and traders are protected against counter party risks.
Using derivatives, the trader has the potential to make money in all directions of market movements.
