What are futures and options? 3 key lessons for trading in derivatives market
Futures and options (F&O) are defined as standardised contracts which can be traded on the exchanges freely by the traders. A trader buys or sells the underlying asset for a particular price at a predetermined date. In futures and options trading, a promise is made by one party to transfer an asset to the buyer of the future at a particular price and at a particular date.
According to investopedia: “An option gives the buyer the right, but not the obligation, to buy (or sell) a certain asset at a specific price at any time during the life of the contract. A futures contract gives the buyer the obligation to purchase a specific asset, and the seller to sell and deliver that asset at a specific future date, unless the holder’s position is closed prior to expiration.”
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