futures and options trading

Effective Future and Option Trading

Future and Options trading are two most important terms commonly heard in the field of stock market operations in the country. These two denote the derivatives of the underlying asset. Underlying asset is the stocks issued by a particular company. Future and options trading have helped many traders to earn profits for themselves by investing smartly and judiciously in such trading affairs. Under future trading segment a buyer and a seller decides to get into a trade contract where the transfer of goods for money will take place not on an immediate basis but in future. Under Options trading the buyer and seller of an underlying asset decides to buy and sell so at a fixed predetermined price value on or before the expiry of the contract.

Under future the actual transfer of ownership does not take place on an immediate basis. It is kept with the seller for some limited period of time and in future when the market condition is favorable enough the goods are exchanged for a profitable amount of money. In simple words Future market means entering into a business contract for booking a product without immediately deciding on the price value to be taken possession of at some point of time in near future. The difference between the price that would be in future at the time of actual selling and the one that is currently prevalent is called Basis. Options trading favor the buyer only and the seller gets limited flexibility with his choices.