Demat Master: The Ultimate Solution For Demat Accounts And Trading.

What is Futures And Options?

Lets Know it First

Basic Terms In Options

On Expiry Day

1. Out off the Money Option become 0

On Expiry day you have to buy Equity Stock Options Not Nifty Options

Its Better to exit on expiry than keep Holding

Options:

Options are financial derivatives that give the holder the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset (e.g., stocks, commodities, currencies) at a predetermined price within a specified time frame.

Call Options:

Call options provide the holder with the right to buy the underlying asset at the strike price before the expiration date. Call options are often used by investors who expect the price of the asset to rise.

Put Options:

Put options provide the holder with the right to sell the underlying asset at the strike price before the expiration date. Put options are often used by investors who anticipate a decline in the price of the asset

Strike Price:

The strike price is the predetermined price at which the underlying asset can be bought or sold when exercising an option.

Expiration Date:

Options have a specific expiration date, after which they become worthless if not exercised.

Premium:

Option buyers pay a premium to the option seller for the rights conveyed by the option. The premium is influenced by factors such as the current price of the underlying asset, volatility, time to expiration, and interest rates.

What are Futures?

Futures are financial contracts that obligate the buyer to purchase an underlying asset or the seller to sell an underlying asset at a predetermined price and specified future date.

What are Options?

Options are financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price within a predetermined time period.

Key Differences between Futures and Options

Futures are binding contracts, whereas options provide the choice to exercise or not.
Futures obligate both parties to fulfill the contract, while options give one party the right to exercise.
Futures have unlimited profit potential and loss potential, while options have limited risk with defined profit and loss.

Usage of Futures and Options

Futures are commonly used for hedging purposes to manage price risks.
Options are often used for speculation, as they provide leverage and flexibility in trading strategies.

How to Trade in Futures and Options ?

Learn the Basics: Familiarize yourself with the concepts of futures and options.
Open a Trading Account: Choose a reliable and regulated brokerage firm. We recommended List Above.
Complete the Necessary Documentation: Fulfill the account opening procedures.
Gain Market Knowledge: Acquire knowledge about the financial markets.
Define Your Trading Strategy: Develop a trading strategy based on your risk appetite and goals.
Place Orders: Use your trading account's platform to place futures and options orders.
Monitor Your Positions: Keep track of your open positions and market movements.
Implement Risk Management: Set stop-loss orders and use hedging strategies.
Review and Analyze: Regularly review your trading performance and analyze your trades.
Continue Learning: Stay updated with market trends and enhance your trading knowledge. Explore educational resources provided by Upstox.