WHAT ARE FUTURES?
It is derivative financial contracts which obligate the parties to transact asset or funds at a predetermined future price and date. It’s a cycle where the buyer must purchase or sell must sell the asset at the fix or set price, just the as same current market price at the expiration date futures contract detail the quantity of the asset and are standardized in trading on a future exchange, T.hese future can be made use for hedging.
Futures are called future contracts -Allow traders to lock in a price of the left asset or commodity.
*Commodity future such as in crude oil,natural gas.
*stock index future such as the sand p 500px
On one side we have “A”,who holds equity of “RTS Company”,currently trading at 100rs.”A” expects the price go down to 90rs.
so he felt 10rs differntial could impact in reduction of investment valueor make him loss,so using future have over come this.
Option are mainly of two types: call and put.
*Where call option gives the buyer the right to purchase an underlying share at a current price during contract’s liquid life.
*A put option makes the buyer sell the share at the current price during the contract life.
*A call seller has the commitment to give delivery to buyer at the current price even if the present market price is more usual.
*A put seller has the commitment to buy underling shares from the buyer at a present price even if CMP of share is lower.