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It’s a another kind of Marketing within Stock trading to Minimize risk, Maximise profits
To customize the trade in a better way. For example if a trader feels that the price of a share will go up in a future date and does not have the complete investment right now, then he can go for futures to lock the price at a certain level and make money out of that.
Call – If a trader feels that the price will definitely go up beyond a certain amount, then he can enter into a call option by paying the premium and can get the rights to buy from the seller.
Put – If a trader feels that the price will definitely go down beyond a certain amount, then he can enter into a put option by paying the premium and can get the rights to sell from the seller.
<span style=”color: #777777; font-family: ‘Roboto Slab’; font-size: 13px;”>Trader needs the future/call/put option to customize the trade </span><span style=”color: #777777; font-family: ‘Roboto Slab’; font-size: 13px;”>For example if a trader feels that the price of a share will go up in a future date and does not have the complete investment right now, then he can go for futures to lock the price at a certain level and make money out of that.</span>
Traders need derivative instruments because,
1. The amount to be paid upfront is only the margin , so the profit(loss) percentage is high.
2. If a company share value is expected to decrease, then trader can assume a short position with a settlement after a few days. (Customize the trade)
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