Future & Options

Future & Option !

An Investment That Can Take You To Great Heights.

  




    Futures and options are stock “derivatives”. The value of a derivative is derived from the value of an underlying asset, which could be stocks or commodities. When two parties enter into a derivative contract, they are essentially agreeing to buy or sell an asset at a predetermined price and date.

    Who issues Future And Options?

    Options have one issuer, Options Clearing Corporation (OCC). The OCC issues options and guarantees contract performance. OCC issues options regardless of the underlying security issuer. Futures contracts are sold by commodity producers, but they don’t exist until they’re bought.

    Features Of Future And Options

    How Do Future And Options Work?

    Features Of Option

    Strike Price

    This is the rate at which the option owner can buy or sell if the contract is exercised. The strike price is fixed.

    Intrinsic Value

    Intrinsic value is the strike price minus the current security price. Call options have intrinsic value.

    Premium/Down payment

    Option exercise costs a ‘premium’ Unexercised holder loses premiums. After premiums, the investor gets the balance.

    No Obligation To Buy Or Sell

    By expiration, the investor can buy or sell the underlying asset. No buy-or-sell required. The option expires if the holder doesn't buy or sell.

    Types Of Future And Option

    Let’s look at different types of futures and options.

    Types Of Options

    A call option gives the buyer/holder the right to buy an asset.

    A put option gives the buyer/holder the right to sell an asset.

    Types Of Options

    Futures on stocks, currencies, index, interest, and others.

    Futures on commodities, energy, and metals, among others.

    Benefits Of Future And Options

    Investors can reap many benefits from this investment vehicle. Some of the benefits of future and options include the following: –

    Price Determination

    In financial markets, asset prices are unpredictable. Futures and options let buyers and sellers set a price to trade.

    Market Efficiency

    Futures and options prevent market imbalances. Prices of derivatives and underlying assets tend to be equal. This boosts market efficiency.

    Transaction Costs

    Futures and options have lower fees than stocks and bonds. This lowers their transaction costs.

    Risk Management

    Futures and Options are used to hedge risks because their value depends on the underlying asset. You can offset your losses if your contract value falls.

    Comparison Of Future and Options

    BASIS FUTURES OPTIONS
    MEANING Agreement between two parties to buy or sell an asset at a set price and within a set time frame. Futures contracts are agreements to buy or sell an asset at a specific price on a set future date.
    OBLIGATION Both parties are obliged to perform the contract. Only the seller is obliged to perform the contract.
    STOCK EXCHANGE Are not traded on an exchange. Are traded on an exchange.
    MATURITY Matures after the delivery of the underlying asset. May not evolve when the underlying asset is delivered.
    PREMIUM No premium is paid. The buyer pays the seller a premium.
    RISK High. Comparatively Low.

    FAQ

    The option lot size is the minimum number of shares. NSE F&O lot sizes vary by index and stock. BSE and NSE set lot size. Exchanges periodically revise index and stock lot sizes.

    The lot size is the number of securities in one contract. The lot size is determined by the minimum contract size at the time of derivative contract introduction.

    Both futures and options are leveraged, so profit and loss are magnified.

    How you can Apply for Future and Options through Swaraj Finpro

    It is quite easy to invest in Future and Options through Swaraj FinPro
    Invest Now
    Share This