THE BASEMENT – FUTURES & OPTIONS

Spot market is where equity is traded.
Shares or commodity are purchased for delivery here in spot market.
Only long position can be created.
Exchange Introduced Derivative Instruments, Futures & options.
Exchange forms the Guidelines for the Derivative Segment.
The future contract provides rights to both buyer & seller of the contract i.e. Rights to Buy for buyer of the contract & Rights to Sell for the seller of the contract at the agreed price. Margin is to be paid by both buyer and seller
In the option contract only the buyer of the contract gets the rights and also do not have any obligations. Seller of the contract do not have any rights but will get premium for signing the contract.
In Physical Settlement the Stocks are delivered after paying the agreed price whereas in Cash Settlement only the difference between the agreed price and the market price is settled.