Learn about Futures and Options
Stock market trading in our country and everywhere is becoming increasingly popular with many interested traders who want to gain access to some extra income apart from their regular sources of incomes. Many can be seen investing handsomely in trading market operations. Futures and Options are two most significant derivatives of an underlying asset of the trading stock market. The term ‘underlying assets’ convey the idea of stocks issued by a particular company. These two names are commonly heard in the fields of stock market operations. The term “Future” denotes the idea of entering into a contract with the other party involved whereby the ownership of a particular underlying asset will be transferred in near future at a price to be determined at that moment ion future only. Futures When someone enters into a future contract with the other party involved it suggest the idea that the price of the commodity meant to be purchased in near future in terms of cash at a price value that will be decided at some point in future. Similarly, when a person or rather trader sells a future contract it denotes the idea that the ownership of that particular asset or commodity will be transferred at a price value which will be determined in near future when the actual delivery of products will take place. The contracts are made in present but the delivery of goods as well as payments in terms of cash money takes place in future. Such marketing or trading strategy is termed as Future Trading and markets for such trading are called Future Markets. Spot markets are those where goods are exchanged for money right at the time of getting into a contract. It is very natural that the value of payment in monetary terms in Future Markets is always comparatibly very high than those at the Spot markets. As the price of any commodity tends to get higher as day passes so prices are bound to get influenced with the existing pricing strategies of the coming days in future. Equities too can be traded following Future Trading strategies. The differences between the price value of the goods or equities at present times and the ones that will be in future is termed as the Basis. This kind of Future Trading that is generally done these days taking the advantages internet where it is called Online Future Trading. This kind of Trading in future is more lucrative as it earns greater profits for the sellers. Options An Option trading strategy is not very much profitable and preferable for the sellers as they enjoy lesser flexibility in this kind of marketing strategy. Under Options the buyers are always at an advantageous position. Options are instruments which entitle and empower the holders of such contract to trade in them at some predetermined prices. One can witness two kinds of Option available which are “Call” option and “Put” option. Call option allows the buyer to buy the particular underlying asset at a price called Strike Price. Under the other option the seller can buy and the buyer can sell the underlying asset.