The Futures and Options in Share Market

Share market A market where shares are publicly issued and traded is known as a share market. The answer to ‘what is stock market?' is pretty similar to that of a share market. The key difference between share markets and stock markets is that the former only allows one to trade shares. The latter allows you to trade in financial instruments such as derivatives, bonds, mutual funds, as well as shares of listed companies. Futures A futures contract is the obligation to sell or buy an asset at a later date at an agreed-upon price. Futures contracts are a true hedge investment and are most understandable when considered in terms of commodities like corn or oil.  OPTIONS Options are based on the value of an underlying security such as a stock. As noted above, an options contract gives an investor the opportunity, but not the obligation, to buy or sell the asset at a specific price while the contract is still in effect. Investors don't have to buy or sell the asset if they decide not to do so. Types of Options: Call and Put Options - A call option is an offer to buy a stock at the strike price before the agreement expires. A put option is an offer to sell a stock at a specific price. Who Should Invest in Futures and Options? Traders engaging in future and option trading can be classified into the following types - Hedgers - such individuals enter into futures and options contracts in the share market to reduce investment volatility concerning price changes. Locking in a price for transaction at a future date helps individuals realise relative gains if the price moves adversely with respect to a trading position assumed by a buyer. Speculators - Speculators predict the direction of price movement in a market as per an intrinsic valuation and economic condition and choose to take an opposite stance in the present to gain from such price fluctuations.