- This topic has 327 replies, 323 voices, and was last updated 2 years, 7 months ago by
.
-
Posts
-
In option contract, buyer has the rights to buy or sell with no obligations. There is
In future contract, buyer has the rights to buy and seller has the rights to sell with obligations.
In a future contract both buyer and seller have obligations and rights and a margin money is collect from both the parties and settled on a daily basis based on the market fluctuation. In options buyer has no obligations but has rights to buy or sell; however, the seller has no rights but gets a premium for signing the contract. A call option and put option is given to the buyer. If the buyer feels that the derivative will go up more than the strike price then he will exercise call option. If the buyer feels that the derivative instrument will go below the strike price then he will exercise put option and the premium will fixed between seller and buyer.
In future contract the buyer and seller has the rights and obligation.
In option contract the buyer and seller has the rights to buy or sell, but without obligation
In option contract, the buyer has the rights to buy or sell the shares without obligation whereas in future contracts, the buyer or seller has the rights to buy or sell shares with obligation.
The main difference lies in the obligations to execute the contracts.
In the case of futures contract the buyer or seller is obligated to complete the contract at a specified date and price.
In case of Options contract the buyer or seller does not have the obligation to execute the contract . If in favour of the buyer or the seller it can be excercised and if not in favour it is left to expire without excercising it ,so only the premium paid for it is lost.
- You must be logged in to reply to this topic.
