Future And Options Trading Example India

   2022-04-27       7        Agriculture
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Futures trading is a contract between a buyer looking to invest and a seller and where the contract is made for the future and has an expiration date.

A futures contract is a legally binding agreement to buy or sell an asset at a predetermined future date and price. Options on futures are contracts that represent the right, not the obligation, to either buy (go long) or sell (go short) a particular underlying futures contract at a specified price on or before a specified date, the expiration date.


The expiration date is the date at which options/futures contracts expire. On the expiration date, if a futures contract or option is still open, then it will settle (closeout) with the price of the underlying asset. If a futures contract or option expires, and no one exercises it, then it will be worthless by expiration day.

Calls and Puts: Rights for Buyers

Call option and put option buyers, who are long on these contracts, purchase them through a brokerage account in which they can already buy stocks, ETFs, and other options. Those who are long calls and puts are simply called holders or owners.


A call option gives the buyer the right to buy (go long) a particular underlying futures contract, at a stated price, on or before a specified date in the future. It represents an obligation on the part of the seller, who must deliver the underlying commodity upon exercise.


A put option conveys to its buyer the right to sell (go short) a particular underlying futures contract, at a stated price, on or before a specified date in the future. A buyer of a put option has the right but not the obligation to sell futures.

Calls and Puts: Obligations for Sellers

Option sellers do not currently own contracts they are selling to option buyers. Instead, option sellers create these contracts and take short positions that convey a potential obligation to take the opposite position of an option buyer.

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