Futures and options trading India is a very important aspect of the Indian stock market scenario

Futures and options trading India is a very important aspect of the Indian stock market scenario

Futures and options trading is a very important aspect of the Indian stock market scenario. It is an innovative way of trading and the share market regularly deals in these. They have a huge impact on the India stock market. Hence it is very important to understand the basics of futures and options. So how do you define futures and options and what is the essential difference between them? 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.

It recognizes a difference between right and obligation. The main difference between a future and an option is very thin and must be understood. In a "future" the buyer does not have a choice to buy an asset or not, he necessarily has to buy it. But when it comes to "options", as the name suggests, the buyer has an option to buy it at a later date. If this is clear, one can understand what differentiates futures and options.

It also deals with futures and options derivatives. In it there are two important parties namely- buyer and seller. The buyer and seller agree upon a contract wherein it is stated that the contract will be completed in a future date. Hence it is called "Futures". Now when a buyer and seller enter into a futures contract they do so under the awareness that the particular or specified transaction will have to be completed on the date of maturity.

Futures and options trading is preferred by many people today. It needs to be understood wholly if one wants to trade.

Futures and options trading prevents us from 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.

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