Knowing Futures and Options

Futures and Options are the two most important derivatives commonly heard in the trading markets in the country. It denotes the derivative of an underlying asset. The term “underlying asset” simply means the stocks issued by a company or a commercial organization. As the name suggest Future refers to the kind of agreement where the act of exchanging ownership of a product takes place in near future. On the other hand Options is primarily refers to an instrument that gets traded at the derivative segment in the stock market. Both Futureand Options are very important derivatives in the stock markets. 

Under Future a buyer and a seller gets involved in to mutual business contract whereby they decide to exchange the goods for a price value which will be decided in future and the actual transfer of ownership too takes place in the future only. This type of market business contracts do actually favor the seller very much in terms of greater price value which he or she can expect from the agreement. As price tends to increase with time hence the market value of the product in question generally gets doubled or at least fairly hiked when the actual buying and selling process takes place on a date in the future.  It is like booking a product for future trading. 

Options suggest the contract between a buyer and a seller of an underlying asset at a price decided among themselves on or before the expiry date of such contracts get over.