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Tagged: Need of Derivatives
A trader needs futures and options to maximize the returns and minimize the risk.
If a trader feels that the price of a share will go up in future 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 it.
Call Option- 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 Option-<span style=”line-height: 1.5;”> </span><span style=”line-height: 1.5;”>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>
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So that he can decides his gain or loss while trading
Futures and options are needed to maximize profit and minimize risk
In futures – investment is not 100% and only margin money has to be paid
In call / put option we can customize our trade. If you expect your money value to go up you can go in for call Option and if you expect your price to go down you can go in for put option, but more study has to be done before going into options.
To ensure the returns.
Options are bought and sold before expiration to lock in a profit or reduce a loss to less than the premium paid
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