How option contract differ from future contract?

[clintonfernando]

FUTURE CONTRACT:Buyer has the rights to buy.Seller has the rights to sell.settlement is done on a daily basis..

OPTION CONTRACT:Buyer has the rights to buy.No rights for seller.settlement is made once contract is expired..

[Suriyaprabu]

Future contract – Both buyers and sellers has rights

Option contract – Buyer has rights and seller doesn’t have rights

[Ayyasamy muthukumar]

Future contract:

Both buyer and seller have the rights and take equal risk with respect to the price movement
Both Buyer and Seller has to deposit Margin with their brokers.
MTM settlement is on every day basis.

option contract:

Buyer is paying the premium and taking limited risk.Buyer of the contract only gets the rights.

Seller is receiving premium, has no rights but has obligations

Seller has to deposit a margin amount with his Broker.

[shalini]

In futures contract, the buyer and the seller both are obligated to complete the contract at the end of the contract period. Both the buyer and seller have to pay margin money to the exchange.

In options contract, the buyer of the contract has the right to buy the asset from the seller but has no obligation. The seller of the contract is obligated to settle the option as per the terms of the contract or when the buyer exercises his right to buy. The buyer has to pay certain amount called premium  to buy the contract from the seller.

In case the buyer does not wish to honour the contract, his loss will be to the extent of premium paid only.

[Divya S]

futures

• both the buyer and seller have the rights and obligation
• equal risk for both the parties
• mtm is followed

incase of options

• the buyer of the contract has only the rights and no obligations, the seller has only obligation but no rights for which the seller recieves a premium
• the risk of the buyer is limited to the premium paid to the seller
• the writer of the options has to make a caution deposit
• setteled on the expiry date

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