A Basic Concept Of Future And Options

In online trading, future and options are known to represent two of the commonest forms of derivatives. These derivatives are actually financial instruments those normally drives their value from some kind of underlying asset that can be shares and equities, currencies, debt and even indices of these assets. Transferring the price risk from one party to another is considered to as the primary function served by future and options trading felicitating risk allocation to parties who are willing to take them.

One of the recent successes that the Indian stock market has achieved during the last decade or so is widespread popularity of the exchange traded derivatives segment – especially in areas like option contacts and individual stock features. 

In reality future contracts are agreements in which buyers agree to purchase an underlying asset against a future date price that is agreed upon at present. This type of contracts is standardized by the stock exchange and it is also the exchange that sets all other terms except for the price. Purchasing a futures contact means that the purchaser is promising to pay a certain mutually predetermined value for the asset within a specific duration of time. On the other hand the person who is selling the asset is making an effective promise to transfer the asset against the specified price at any particular time.

In contrast to futures, options are instruments those give the holder the right to buy and sell an underlying asset against a predetermined price and they are normally of two types ‘call’ options and ‘put’ options. A lot more information is available online on futures andoptions that interested readers will find for good help.