1. 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.
2. A future is a right and an obligation to buy or sell an underlying stock (or other asset) at a predetermined price and deliverable at a predetermined time.
3. Execution of contract:
FUTURES:
On the agreed date.
OPTIONS:
Anytime before the expiry of the agreed date.
4. Futures require a higher margin of payment as compared to options.
5. Futures are preferred by speculators and arbitrageurs.
Options are preferred by hedger.
6. Level of Risk:
Futures:
High
Options:
Ristricted to the amount of premium paid.
7. Advance payment:
Fututes:
No advance payment
Options:
Paid in the form of premiums.
8. Futures are unlimited profit, potential loss instruments and options contracts are unlimited profit, limited loss instruments.
9 Futures may be great for index and commodities trading, but options are the preferred securities for equities.
Showing posts with label options. Show all posts
Showing posts with label options. Show all posts
Saturday, 15 December 2018
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