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Margin- the deposit made by the buyer and the sellwr to the exchange before getting into a trade
MTM – the deposit made by the stockbroker to the exchange over the margin paid if the trader decides to hold on to his position a day longer
Strike price- the price decided by the buyer and seller on the trade
Expiry date- the date on which the contract of the F and O gets terminated.
Lot size- the predetermined number of shares which are sold in the F and O market.
Premium- the price paid to buy the option.
The exchange plays a role of a garantor for both the buyers and the sellers thus eliminates counter party risks.
It is a contract made by the buyer and a seller to pay the price for the assest on a particular date in the future
Call option – buyer of the option has the right to buy the product at a particulr price but is not obligated to do so..
Put option- buyer of the put option has the right to sell the product at a particular price but is not obligated to do so.
Future contract – buyer / seller have the right to buy or sell the product and have to settle the terms of the contract on or before the decided date.
Option contract – the buyer has the right but is not obligated to buy on or before the decided date. But the seller has to comply if the buyer exercises the terms.
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