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Futures and options

Discuss Futures and options within the Financial Management ( FM ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; An interesting question to ask at this stage is - when would one use options instead of futures? Options are ...

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Sunanda K. Chavan
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Futures and options - October 1st, 2010

An interesting question to ask at this stage is - when would one use options instead of futures? Options are different from futures in several interesting senses.

At a practical level, the option buyer faces an interesting situation. He pays for the option in full at the time it is purchased. After this, he only has an upside.


There is no possibility of the options position generating any further losses to him (other than the funds already paid for the option). This is different from futures, which is free to enter into, but can generate very large losses.

This characteristic makes options attractive to many occasional market participants, who cannot put in the time to closely monitor their futures positions.

Buying put options is buying insurance. To buy a put option on Nifty is to buy insurance, which reimburses the full extent to which Nifty drops below the strike price of the put option. This is attractive to many people, and to mutual funds creating “guaranteed return products”. The Nifty index fund industry will find it very useful to make a bundle of a Nifty index fund and a Nifty put option to create a new kind of a Nifty index fund, which gives the investor protection against extreme drops in Nifty.
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Rose Marry
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Re: Futures and options - April 14th, 2016

Quote:
Originally Posted by sunandaC View Post
An interesting question to ask at this stage is - when would one use options instead of futures? Options are different from futures in several interesting senses.

At a practical level, the option buyer faces an interesting situation. He pays for the option in full at the time it is purchased. After this, he only has an upside.


There is no possibility of the options position generating any further losses to him (other than the funds already paid for the option). This is different from futures, which is free to enter into, but can generate very large losses.

This characteristic makes options attractive to many occasional market participants, who cannot put in the time to closely monitor their futures positions.

Buying put options is buying insurance. To buy a put option on Nifty is to buy insurance, which reimburses the full extent to which Nifty drops below the strike price of the put option. This is attractive to many people, and to mutual funds creating “guaranteed return products”. The Nifty index fund industry will find it very useful to make a bundle of a Nifty index fund and a Nifty put option to create a new kind of a Nifty index fund, which gives the investor protection against extreme drops in Nifty.
hey mate,

Please check attachment for Step by Step Trading In Future and Options, so please download and check it.
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File Type: pdf Step by Step Trading In Future and Options.pdf (3.50 MB, 0 views)
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