FUTURE CONTRACT: buyer has rights to buy and seller has rights to sell with no obligations.
settlement is done on daily basis.
OPTION CONTRACT: buyer has rights to buy where as seller gets no rights rather he is paid with premium to sign the contract. settlement is done only on the date of expiry.
CALL OPTION: buyer gets the rights to buy at the strike price.
PUT OPTION: buyer gets the rights to sell at the strike price.
*buyer has no obligations.
*however buyer has to pay premium to the seller for him to take the risk. premium is decided by both buyer and seller.
CASH SETTLEMENT: At the end of the contract the holder of the position is simply debited or credited the difference between their entry price and the final settlement.
PHYSICAL SETTLEMENT: At the end of the contract the holder of the position will either have to deliver the physical commodity if short or take delivery if long
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Good one