Difference Between Option And Future

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Derivatives are tools that get their value from an underlying security like a share, debt tool, currency or equity. Futures and options are the two kinds of derivatives usually traded. Investment in futures and options with Kotak Securities can assist make your financial infrastructure secure.

Futures

A futures deal is an agreement between two parties to trade an asset at a sure time in the future at a definite price.

Such a contract process for those who do not have the capital to buy the agreement now but can bring it in at a definite date. These agreements are commonly used for arbitrage by investors. It shows traders purchase a stock at a low price in the cash market and sell it at a higher price in the futures market or vice versa. The idea is to play on the price difference between two markets for the same

Stock

In futures contracts, the responsibility is on both the buying investors and the seller to perform the agreement at a certain date. Futures agreements are special types of onward contracts with Free Stock Trading Tips For Higher Profits. They are uniform exchange-traded agreement like futures of the Nifty index.

Options

An Option provides the buyer the authority but not the responsibility. As a investors buy, you may decide to let the option to purchase call or put option drop. The seller has a compulsion to obey with the agreement. In the case of a futures agreement, there is a responsibility on the division of both the buyer and the seller.

Options are of two types – Calls and Put options:

‘Calls’ provides the buyer the authority, but not the duty to purchase a given capacity of the underlying asset, at a specified price on or before a specified future date.

‘Puts’ offer the buyer the right, although not the responsibility to sell a known quantity of the fundamental asset at a given price on or before a given future date.

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