What is future and option in share market and how it is executed?

Question

What is future and option in share market and how it is executed?

Answer 1

Futures and options are type of market in comparison with cash markets.....

The only diff is that the lot size of Futures and options(also known as derivatives) differs from stock to stock as per its valuations, the lot size in cash market is however 1 qty but the qty in derivatives are decided and modified by the exchange from time to time....

The risk and reward envolvement is also huge in derivaties as because of the huge lot size in comparison with cash markets.....

And understanding its stragegies is not that easy, its very very vast, u have to devot a good time to it and the best and easy way for the time being to learn its basic and mode of trading, kindly contact ur broker.......Broker is bound to give u a thorough knowledge on it and also shall guide u on the executaion part..............

ENJOY.................but BEWARE, as because there is a huge risk envolvement there in derivatives..............

Answer 2

futures contract - you buy or sell a commodity at a particular price on a specific date in the future.

option - buy or sell property at an agreed price on a specific date.

Answer 3

Both futures and options are considered derivatives products. They are called derivatives because, contrarily to a stock which is a share in the company's real assets, they are only based on the stock rather physical assets.

So futures contracts are agreements between you and me that I will deliver something (a stock) at an agreed-upon price (now) for future delivery (say one month from now). For options, the most common are puts and calls. Puts are "rights" to sell something (a stock) at a certain price in the future (say one month from now) no matter what the real price will be that day. Calls are rights to buy. The difference between futures and options is that if you enter a futures contract you have to take/make delivery (or roll it over) whereas if you buy puts/calls you exercise them only when/if you profit from them (in the money) ie. if you buy a call option on a stock for $2/share to be able to buy a stock one month from now at $40. Assume today's price is $35 and one month from now the price is $55. In this case you exercise your call option, that is, you are able to buy the stock at $40 while it's real price is $55 (that makes you a profit of $13/share). If the price is $30 one month from now, you do not exercise the call option and you lose only $2 instead of $10.