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Option:
An option gives the buyer the right but not the obligation to buy (or sell). The buyer have minimum risk. They pay premium but seller only have obligation and they have to pay margin amount to the broker.
Future:
Both buyer and seller have obligation and both will pay margin amount to the broker.But buyer need not pay any premium. And risk is taken by both the parties.
options: Only seller have the obligation and buyer have to pay premium seller to pay margin amount
future: both have obligation and no premium but margin amount should be made by both
Option Contract:
Settlement made at the end of contract date
Buyer have the rights but not obligation
Future Contract :
Settlement made on day to day based on market behavior
Both Buyer and seller have rights and obligation
Option : Settlement made at end of Contract.
Future : Settlement is made day to day basis.
FUTURE CONTRACT:
Buyer has the rights to buy.
Seller has the rights to sell.
Both buyer and seller have to honor the contract.
When the price moves in their favor, buyer / seller get rewarded.
settlement is done on a daily basis using (MTM)
OPTIONS CONTRACT:
Buyer has the rights to buy.
No rights for seller. Seller receives premium form buyer to agree the contract
Buyer makes profit when the price goes above his strike price in case of the call option or below in case of put option.
Profit for Seller of option contract is restricted to premium.
settlement is made once contract is expired.
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