Learn About Future & Options Trading
Stock market trading is in India and everywhere is gaining very popularity these days and a considerable percentage of investors can be seen investing in stock market trading. futures and options trading are two most commonly used derivatives of an underlying asset. Futures denotes the idea of entering into some kind of future market dealings with the other party involved whereby it is decided to buy or sell a particular asset at a certain point of time in near future at a value that will be decided therein. Online Futures Trading To buy a future contract means you are promising someone through written documents the payment of the amount decided by both the parties at a certain point of time for that particular asset in future. Similarly in case of selling a future contract implies you are ready to transfer the ownership of the asset in question to the other party involved at a certain point of time in near future in return for some payment. When this is done online then it is termed as Online Futures Trading. Some of the most commonly used assets on which such contracts are made are those of commodities, currencies, equities etc. A spot market is the market where goods are exchanged right then and there at the current prevailing value of the goods. The difference in the value of the particular asset in question in spot market and that of future market is termed as ‘Basis’. The price that will be charged in future market is always higher than the ones charged at the spot markets on a current basis. Generally for such reasons assets and goods are kept in hold, allowing its price to rise higher and then initiating right steps at right time that will make sure one gets higher returns. Options trading Under options a seller is not witnessed to enjoy much flexibility with his or her choices and is obliged to follow the intentions of the buyers only. There are two kinds of options called “cal” option and “put” option and both these facilitate the buyers only. A call option means giving the buyer the right to purchase the asset at a given price which is also known as the strike price. The holder of this type of option has the right to demand selling of the underlying assets from the sellers that cannot be denied by the seller. If the buyer wants to buy the seller will have no option but to give in. Whereas in case of put options a seller has the right to buy and the buyer has the right to sell the assets in question. The right to exercise the option is bestowed upon the buyer all the time. On the other hand a seller involved is left with only obligations and no rights. His scopes to act at his own discretion is very limited or almost none. His condition is compensated with the allowance of a price known as “premium” in the trading markets.