Option and a Future allow an investor to buy an investment at a specific price by a specific date. But the markets for these two products are very different in how they work and how risky they are to the investor.
- : Cash market is where the delivery of shares and payment will take place on the same day.
- : In futures exchange will maintain refundable margin from both the parties ,and manages the trade. In options it deals with the premium for the deal and executes it.
- : Margin – is the amount paid by both buyer and seller when signing a future contract. It is a kind of deposit MTM – is Mark to Market, which is done at the end of the day for all future contracts based on the closing market price of the share in future contract Premium – is the amount paid by the buyer to seller when signing a Call/Put option contract Strike Price – is the share price mentioned in future and option contracts. The settlement should be made at this price on the final day whatever the market price may be Expiry Date – is the date when settlement should happen for Future and Option contracts. The contract is no more valid beyond this date and a new contract need to be signed for future trading Lot Size – is the number of shares that is being traded
- : Option Contract – is one where buyer alone gets rights. If it is Call option the buyer gets the right to buy and if it is Put option the buyer gets rights to sell. Seller gets a premium for signing the contract Future – is one where both buyer and seller have rights (buyer has buying rights and seller has selling rights) and both pay a minimum amount while signing the contract. The settlement should happen even if one of the parties approach the exchange
- : Call Option- buyer gets the right to buy Put Option- Buyer gets the right to sell In Call option,Buyer gets Right to buy and in Put option,Buyer gets Right to sell . In Call option, if prices rise, Buyer gains where as in Put option ,if price falls ,Buyer gains. The option premium is continually changing. It depends on the price of the underlying asset and the amount of time left in the contract.
- : 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/Call/Put are all options for a trader to make a deal happen during the current time and make the settlement in a future date. Also there is minimal payment like margin/premium that is required during the time of deal. So in a derivative market a trader needs futures/call/put, it encourages traders to trade.
- : Yes, NIFTY has created various Futures and Options that can be traded.
- : In a physical settlement, the asset has to be given to the buyer. In a cash settlement, a buyer accepts cash as a form of settlement