What Is Future And Options In Share Market
Options & Futures: What's the Difference? Futures and options are both financial instruments used to profit on, or hedge against, the price movement of commodities or other investments. The key difference between the two is that futures require the contract holder to buy the underlying asset on a specific date in the future, while options — as the name implies — give the contract holder the option of whether to execute the contract.
Futures are a contract that says you will buy an asset (like corn futures) on a specific date for a specific price. If you are holding futures when they expire, you have to buy the underlying asset for the agreed-upon price. Futures contracts can be complex and trade on a different exchange than the underlying asset that the contract is based on.
In futures contracts, an initial margin payment is required of the contract holder. This payment is a small percentage of the value of the contract overall. If you are showing a loss in your futures trading account and the available equity drops below a required minimum, you will be called upon to deposit more money into your account to bring it back up to the original equity level.
If you buy an oil futures contract for $70 and the price goes up to $75 at the end of the specified period, you'll make $5,000 ($5 x 1,000 barrels) when you sell. That's a pretty substantial return on investment if you only had to hold a few thousand dollars in your brokerage account during that time.
Puts: Put Options are contracts that give the contract holder the right, but not the obligation, to sell an underlying asset at a specified price by a certain date.
Calls: Our options contracts give the contract holder the right, but not the obligation, to buy an underlying """