Summary:
1. collects the refundable margin deposits from both seller and buyer in case of future contracts,from seller incase of call options, from buyer in case of put options.
2. The spot market is also the “physical market” or the “cash market” because of the instant and immediate pace and movement of orders.
3. In the stock market, margin trading refers to the process whereby individual investors buy more stocks than they can afford to.
Mark-to-market (MTM) is a method of valuing positions and determining profit and loss.
Premium is the excess return that investing in the stock market provides over a risk-free rate.
A strike price is at which a specific derivative contract can be exercised.
An expiration date in derivatives is the last day that an options or futures contract is valid.
Lot size is a measure or quantity increment suitable to or precised by the party which is offering to buy or sell.
4. A futures owner has the obligation to buy or sell a specified quantity of an asset at a specified price on a specified date.
In contrast, an options holder has the right (but not the obligation) to buy or sell a specified quantity of an asset
5. Call options provide the holder the right (but not the obligation) to purchase an underlying asset at a specified price (the strike price), for a certain period of time.
Put options give the holder the right to an underlying asset at a specified price.
Always the seller decides the premium.
Why do we need Futures and Options???
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