Futures and options are the major types of stock derivatives trading in a share market.
These are contracts signed by two parties for trading a stock asset at a predetermined price on a later date
These futures, and options are used for two main purposes.
One is to hedge against price risks;
Another is to profit from changes in prices or speculation.
Every future, and options contract needs to have a counterparty. Every buyer of a future or options contract needs to have a seller,
- : Spot market or cash market is a public financial market in which financial instruments or commodities are traded for immediate delivery.
- : Derivative instruments like futures and options where exchange plays a major role. 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 trading involves buying and selling of securities in one single session Mark to market (MTM) is a method of measuring the fair value of accounts that can fluctuate over time, such as assets and liabilities. Premium is the amount of extra money which the investors of the company are ready to pay to the company for the purchase of the company’s stock over its par value. Strike price at which a contract can be exercised, and the price at which the underlying asset will be bought or sold. Expiry date is the date, as the name suggests, on which a particular contract (usually a derivative contract) expires. Lot size refers to the number of shares you buy in one transaction.
- : A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. ... An options contract gives the buyer the right to buy the asset at a fixed price.
- : A call option gives the holder the right to buy a stock and a put option gives the holder the right to sell a stock. it’s the market makers and specialists who determine the premium .
- : A futures contract is an agreement to buy or sell an asset at a future date at an agreed-upon price. Typically, futures contracts trade on an exchange; one party agrees to buy a given quantity of securities or a commodity, and take delivery on a certain date.
- : Future and options in the share market are contracts which derive their price from an underlying asset (known as underlying), such as shares, stock market indices, commodities and more. Futures and options basics provide individuals to reduce future risk with their investment through pre-determined prices.
- : We 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 .