Margin / MTM / Premium / Strike Price / Expiry Date / lot size

  • : Spot/ Cash market is the place whether the deal happens followed by the settlement on the same day.
  • : The exchange acts as the middleman in derivative market making. It collects a caution deposit and makes sure trades are happening in a fair manner.
  • : Buying on margin is borrowing money from a broker to purchase stock. MTM is a way to evaluate the current position and determining profit and loss. A strike price is used in a call and put option, which simply determines the price at which the contract becomes active. Expiry date is the date when the contract expires Lot size – The no. of shares we buy in one transaction
  • : In a future contract, both the buyer and seller have rights to buy/sell. A buyer of CALL option has rights to buy, but no obligations. A seller of CALL option gives rights to the buyer. He has obligations but no rights. A buyer of PUT option gets the rights to sell, but no obligations.
  • : Who decide the premium?: Call option – Buyer gets rights to buy but no obligations Put option – Buyer gets rights to sell but no obligations The buyer and seller decide the premium.
  • : A futures contract is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future. Futures contracts are standardized for quality and quantity to facilitate trading on a futures exchange.
  • : Futures/ call/put are required for traders to customize the trading. In the derivative market, the entire stock price is not required and only margin needs to be paid. And derivative markets reflects the price fluctuation on daily basis but in equity market, it can be realized only when the stocks are sold.
  • : Yes. Index can be used in order to trade NIFTY using the derivatives market.
  • : 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.
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