Futures and options trading basics

Futures and option trading are an essential way of insuring out decisions made in the stock market. In futures and options, the rights are traded instead of ownership.In these types of contracts the strike price and the expiry date are fixed. These types of contracts do not do physical settlements, instead do cash settlements in the MTM way. MTM means market to market, used in futures or option trading, where compensations is made when the market closes according to the changing share prices, rather than settling the amount when the contract expires. In option trading a premium is given to the seller of rights as a bribe, in order for him/her to accept the contract.