Call option is a type of options contract whose value is directly proportional to the movement in the price of the underlying asset. You buy a cal option when you expect the price of the underlying to go up.

Put option is a type of options contract whose value is inversely proportional to the movement in the price of the underlying asset. You buy a put option when you expect the price of the underlying to go down.

Price of the premium is decided based on the underlying stock price in relation to the strike price (intrinsic value), the length of time until the option expires (time value) and how much the price fluctuates (volatility value).

  • : Spot market is a place where the financial instrument most often a company's share gets settled on the spot ,ie on the same day. It is called as Cash market because the settlement is done for cash in exchange of the company's shares. Equity market which also refers the same is called that way because a single equity share gives equal rights of ownership of a company.
  • : The role of exchange in derivative instruments is to make sure both the parties involved fulfill the contract agreements.
  • : Margin is the collateral that a holder of a financial instrument deposits with the broker to cover the credit risk the holder poses for the counterparty. If in case the holder fails to fulfill the contract, the exchange has the right to take the margin from the account. Marked to market is a method that the exchanges follow to track the current market value of a fianancial instrument. The exchange credits or debits money from the holders account based on that particular days's profit or loss. This reduces the hassle involved on the final settlement. Premium is the amount given by the option buyer to the option seller as a guarantee to buy the underlying shares after the expiry day. It is non refundable. Strike Price is a price at which the derivative contract can be bought and sold after the expiry. Expiry date is the date until which the derivative contract stands valid. After the expiry date, the contract can't be exercised. Lot size is the minimum number of quantity at which an derivative contract consisting of the underlying asset can be bought or sold. Parties can only buy or sell in multiples of the lot size.
  • : Option contract is a type where the buyer has the right but not obligated to buy the underlying asset at the time of expiry while the seller is obligated to sell it if the buyer wishes to exercise the contract. The buyer hence pays a premium beforehand to the seller to make the deal fair. Futures contract is a type of contract where both the buyer and seller are obligated to fulfill the terms of the agreement on the expiry date. The seller has to have a margin and the buyer deposits a cautionary amount incase if one of the parties involved fails to honor the contract.
  • : Call option is a type of options contract whose value is directly proportional to the movement in the price of the underlying asset. You buy a cal option when you expect the price of the underlying to go up. Put option is a type of options contract whose value is inversely proportional to the movement in the price of the underlying asset. You buy a put option when you expect the price of the underlying to go down. Price of the premium is decided based on the underlying stock price in relation to the strike price (intrinsic value), the length of time until the option expires (time value) and how much the price fluctuates (volatility value).
  • : Futures contract is a type of agreement where the buyer and seller agrees to buy and sell the underlying asset at a particular price (strike price) in the future on a particular date (expiry date) in aforementioned quantities (lot size) .
  • : Futures are highly leveraged instruments. They have high liquidity.Futures also have less brokerages . Call/Put options are beneficial because the traders especially the buyers have an exit and the sellers get a guaranteed amount beforehand and both can benefit from the fluctuations in the price of the underlying..
  • : Yes, it's possible to trade NIFTY by trading NIFTY futures contract or NIFTY weekly options.
  • : Physical settlement is when the contract is fulfilled and settled by delivering the underlying asset. Cash settlement is when the contract is honored by settling through cash. The current market price of the underlying .
1 Comment
  1. Naresh 1 month ago

    Hi,
    Nice work! we really appreciate your efforts.

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