Terminology used in the market for F&O are learned. Used Rice market analogy for the futures contract. Role of exchange in the future market
- : In spot market where the stock or equity trades are happened immediately. But it contrast to F&O market where trade is happened later
- : maintain refundable margin from the both parties
- : margin: the deposit amount paid by the buyer and seller for the future contract which is refundable. MTM: Mark to market is leveling the profit and loss on day to day basis. Strike price: The price for which the future contract is being signed. Expirary date: Validity of the future contract Lot Size: Number of share for the future contract
- : In Futures contract the player doesn't have the strength of obligation. but in option market the players may or may not buy or sell the stocks, but the buys need to pay the premium and seller need to compensate the amount which moves above the strike price
- : Call option : Rights to buy Sell Option: Rights to sell Premium is decided buy the buyer and seller based on the auction.
- : In future contract, the buyer will pay the premium to the seller and price ammout of the product is mentioned in the contract. if the price goes up buyer make profit and if price goes down the seller makes the profile. In cash settlement MTM basis the cash is settled
- : Entire Stock price is not required to be paid, we need to pay only the margin. only on the end date we need to settle or we can compensate the loss through various derivative instrument.
- : Yes Nifty can be traded via futures and option, we cannot be traded via spot marker
- : Cash settlement: In which the settlement is made through cash,no physical asset is required in it. Physical Settlement: In which the seller need to settle the underlying asset in the contract to the buyer , asset settlement is required.