what are futures and options trading? Is it profitable?
Equity trading is simply buying and selling the shares. However, F&O are derivatives.
The term ‘Derivative’ itself indicates that it has no independent value. Here, the value of the derivate is entirely derived from the underlying asset.
Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain price and time in the future.
Options: An Option is a contract which gives the right (but not an obligation) to buy or sell the underlying at a stated date and at a stated price. Here, the buyer pays the premium and buys the right to exercise this option.
Here’s a video by Finnovationz to understand derivatives better:
I hope it helps. Cheers!
Both are the same thing. Not much different in this. let me clear by an example: An option is like you are giving 10% of the property it means small amount submit and buy a contract. It will expire on Thursday of month end.
Options contracts are instruments that give the holder of the instrument the right to buy or sell the underlying asset at a predetermined price. An option can be a ‘call’ option or a ‘put’ option.
A call option gives the buyer, the right to buy the asset at a given price. This ‘given price’ is called ‘strike price’. It should be noted that while the holder of the call option has a right to demand sale of asset from the seller, the seller has only the obligation and not the right. For eg: if the buyer wants to buy the asset, the seller has to sell it. He does not have a right.
Similarly a ‘put’ option gives the buyer a right to sell the asset at the ‘strike price’ to the buyer. Here the buyer has the right to sell and the seller has the obligation to buy.
In Future, you have to pay more money and its contract also expire on Thursday of month end.A ‘Future’ is a contract to buy or sell the underlying asset for a specific price at a pre-determined time. If you buy a futures contract, it means that you promise to pay the price of the asset at a specified time. If you sell a future, you effectively make a promise to transfer the asset to the buyer of the future at a specified price at a particular time. Every futures contract has the following features:
Buying and selling the share is equity trading. However, F&O are derivatives and they indicates itself that it has no independent value.which has a contract through that contract you can buy or sell the underlying at stated date and stated price.: You can check the equity research firm: www.kalkinemedia.com
Futures and options trading is a form of derivative trading that involves an agreement between the 2 entities, stating that specific units of the underlying asset (like a stock, commodity etc.) has to be traded at a certain price, as well as during a fixed date/within a certain period. Thus, here, the value of the trade depends on that of the underlying asset.
On the other hand, trading on equity does not involve any such agreement and deals with the direct buying and selling of an asset. Here, the exact date and price of the deal is not fixed prior; the trader may gauge many factors - like the current market situations, past performance of the stock, and the performance of the company offering the asset - and make an informed decision of when and whether to trade it.
In equity you can buy even 1 share but in futures you have to buy an entire lot, the quantity of which, is set exchange and they do that to promote participation in derivative.