FUTURE & OPTIONS

*Spot market refers to exchange and settlement of assets immediately.
*In this market ,the ownership is immediately transferred from seller to buyer, once the transactions are executed. *Margin-It is refundable deposit amount paid to exchange by both buyers & sellers to enter into future contract.
*MTM-Mark to market.To settle difference in price on daily basis.
*PREMIUM-The amount paid by buyer to seller for signing the option contract.
*STRIKE PRICE-It is contract price between buyer & seller mentioned in agreement.
*EXPIRY DATE-It is a date at which contract gets invalid(maturity date).It happens every last Thursday.
*LOT SIZE-Minimum quantity of shares to be traded.*In future contract, buyer have right to buy & seller have right to sell on agreed price and obligations as well.
*In option contract , buyer have rights and no obligations & seller have no rights but gets only premium.
*In call option, buyer gets “right to buy” and do not have any obligations.seller do not have any rights on contract but gets premium for signing the contract.
*In put option, buyer gets” right to sell” and do not have any obligations.seller do not have any rights on contract but gets premium for signing the contract.
*Both buyers & sellers decide the premium.
*Future/call/put is required by trader to customise the trading.
*In derivative markets,100% capital is not required unlike equity market.one can go with minimum amount like margin& premium.
*Physical settlement-At the end of the contract, asset has to be delivered.If price goes up then you will get shares, which you can sell at market price and earn profit.
*Cash settlement-At the end of contract, compensation(difference between entry price & final settlement) should be paid.