Futures and Optins, Spot / Cash market, role of exchange in derivative, Margin / MTM / Premium / Strike Price / Expiry Date / lot size, ption contract differ from future contract, call option and put option, Is it possible to trade NIFTY

  • : Spot / Cash market is a financial market where the financial instruments/commodities are traded for immediate delivery or delivery in the same day.
  • : In futures, exchange will get the refundable margin from buyer and seller. The contract will be traded between buyer and seller on the strike price for the stocks. Once the contract is agreed, exchange will take care of mark to market on daily basis until the end of the contract. In options, exchange will execute the trading of the premium between buyer and seller and once agreed, exchange will take care of daily leveling, but the buyer of the contract do not have any obligations.
  • : A margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the the credit risk of their counter party MTM:It is the abbreviation of Marked to Market. The positions in the futures contracts for each member is marked-to-market to the daily settlement price of the futures contracts at the end of each trade day. Premium : It is money paid by the option buyer to buy either call/put option. The seller of the option contract collects the premium to sell the rights to the buyer of the call/put option. Strike Price : The strike price is defined as the price at which the holder of an option contract can buy (call option) or sell (Put option) of the underlying asset when the option is exercised. Expiry Date : It is the last day that an options or future contract
  • : In option contract the buyer of the call/put option has the right to buy/sell but do not have any obligation however the seller has to buy/sell if the buyer exercise the contract, where as in Future contracts both the buyer and seller has the rights and obligation to buy/sell the underlying asset.
  • : Call / Put option is a financial contract between two parties, the buyer and the seller. The buyer has the rights to buy the underlying asset at the expiry date however do not have any obligation. The seller of the contract has the obligation to exercise the contract if the buyer decides to do so.
  • : A futures contract is a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future. Futures contracts are standardized for quality and quantity to facilitate trading on a futures exchange. The buyer of a futures contract is taking on the obligation to buy and receive the underlying asset when the futures contract expires. The seller of the futures contract is taking on the obligation to provide and deliver the underlying asset at the expiration date.
  • : Futures and options have a unique feature that make them a more attractive instrument from a trading perspective than stocks and bonds, that is high leverage. Leverage is a measure of the worth or value of an instrument relative to the money required to buy/sell the investment. Also the trader use the futures and options to hedge their portfolio.
  • : You can trade in Nifty in 2 ways. 1. Either buying or selling Nifty LOTS in "Futures segment", or 2. Buying or selling CALLS or PUTS in "Options segment".
  • : Cash settlement is an arrangement under which the seller in a contract chooses to transfer the net cash position instead of delivering the underlying assets whereas physical settlement can be defined as a method, under which the seller opts to go for the actual delivery of an underlying asset and that too on a pre-determined date and at the same time rejects the idea of cash settlement for the transaction.
1 Comment
  1. Naresh 3 years ago

    Hi,
    Keep up the great work!

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