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The stock market has seen the introduction of futures and options in a big way in the Indian stock market. But the important question is what are exactly futures and options and how do Futures and options trading India work? An option basically is a contract. This contract acts as a right to the buyer or the holder to buy or sell some quantity of assets on or before a specific date at a particular price. Here an important point to remember is that this contract works as a right and not as an obligation. The assets which are mentioned here may be any one of the following- wheat, cotton, oil, gold etc as commodities and equity stocks and bonds as financial instruments. Now, F & O Derivatives are the derivatives in which there are two parties- a buyer and a seller. They both enter into an agreement or a contract to which gets completed or settled in a future date. Hence the name “Futures”. A futures contract is an obligatory transaction in which the buyer and the seller will complete the transaction on the date of the maturity. This means the seller will sell the above mentioned underlying assets to the buyer and the buyer will make the necessary payment on the fulfillment of the transaction. In Futures and options trading India, the main difference is between the right and the obligation of the buyer and seller. Where in futures it is obligatory, in options the buyer has the choice to buy the asset or not on the date of maturity. If this is understood we can understand that F&O Derivatives are nothing but a way to prevent us from the risk of investment. This is because the contract is made on past date at a specified price. So if the price of an asset changes due to fluctuation in the market, this contract will not register the change because it is already bound. Though futures and options have their own advantages, they also have their set of disadvantages since if the price rise; it can be a loss for the seller. So one has to be very careful while dealing in options and futures.
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Futures and Options trading India, F & O Derivatives, Depository services India, Share Trading India, Share Trading Company India, E broking in India,
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