Basics of Futures and Options.

Options and Futures trading constitutes an important part of the Indian equity markets. A expects the price go down to Rs 90. ... For example, on one hand we have A, who holds equity of XYZ Company, currently trading at Rs 100. For example, options and futures on Reliance Industries will be linked to the stock price of Reliance Industries and will derive their value from the same. For example, if one expects corn futures to move higher, they might buy a corn call option. The purchase of a put option is a short position, a bet that the underlying futures price will move lower.

Since futures involves the presence of an exchange, the execution of the contract is likely, whereas options do not have such an option but on the payment of a premium amount, one can lock in the contract and depend on where the direction of prices are towards the end of the duration, the contract can either be executed or allow expiring worthless. In this example, one options contract for gold on the Chicago Mercantile Exchange (CME) has as its underlying asset one COMEX gold futures contract. For example, if one expects soybean futures to move lower, they might buy a soybean put option.

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