The Basics of Futures & Options Trading
Futures and options are two basic derivatives in the stock market. Derivatives suggest the idea of the price of an underlying asset. These two terms can be heard of quite often in the stock markets circles. Stock markets are flourishing in the country as many interested traders are investing their money in such trade affairs in lieu of higher returns. Future market in such trades simply denotes that the person involved in the contract as seller and buyer decides to trade upon a commodity or equity in future at a price that too will be decided in near future at a certain point of time. Futures and Options Trading is both practiced in the stock market fields. Options Trading Options Trading too gets done in the stock market operations. However, it in all cases facilitates the buyers only. The sellers under this type of trading do not enjoy much flexibility or freedom of choices and are obliged to listen to the buyers only. They do not have any freedom to make choices and usually gives in to the buyers. Sellers can seldom act as per their discretion in the trading affairs under Options Trading. Under Options Trading system there are two distinct types of Options called “Call Option” and “Put Option”. Under call option the buyer has the right to buy the underlying asset at a given price which is commonly known as the Strike Price. The Call option contract empowers the buyer to demand selling of the asset by the seller in which the seller has no other option but to simply give in to the wishes of the Buyer. Under Put option the seller has got the right to buy and the buyer is entitled to sale the underlying asset. Here also the seller has got limited freedom as if the buyer wants to sale the asset the former cannot refuse to buy. Under both types of this trading the sellers are not much gainer. The Buyers are always in the advantageous position in this type of stock market trading. This obligatory and limited scopes condition of the seller gets consolation somewhat by the payment of a price called “Premium” in the Options Trade markets. Futures Trading As the very name indicates a person getting into this kind of contract in the stock market trading system with the other person involved decides to trade on an underlying asset in coming days at a price that will be decided upon at future only. Various commodities or goods, equities and currencies can be traded upon like this manner. Online Futures trading is the same with an exception that the trading affairs get done over the internet online because of its efficiency, fast and reliable transfer of payments and ensuring a valid trade affair. An online account is mandatory for doing such trades over the internet. Electronic transfer of equities cut out the harassment done by the middlemen, ensures fast business and also helps in getting valid information about the market and trade related news anytime anywhere. Traders do not need to travel anymore to the trading sites for trading purposes.