Derivative instruments are essential for traders to diversify their portfolio and to hedge over other investments. Allows to trade not only on a specific company stocks but also on indices that represent top companies , specific sector thereby eliminating the need for fundamental analisis and trade only with tech analysis.
Futures and options are contracts between buyer and seller wherein the future contract buyer & seller have rights & obligations equally and gets gains or loss depending on the fluctuation of the asset price. Rather in options , the contract buyer has the right to exercise the deal with no obligation and the seller has no right but need to oblidge.
Contract buyer has the right but if that right is to buy thats called call option and if that right for buyer is to sell that is called put option.
Hi,
Answering to your question 1 :: Future contract cash settlements – daily only or on expiration?
Future contract are settled in Mark to Market (MTM) basis.
Answering to your question 2 :: Options- exercised by buyer only on exp date ?
yes, options can be exercised only on expiry date.
Future settlement setlled in MTM basis(daily ). cash settlement is possible this way but So how do physical delivery work in futures ? Can u clarify ?