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Futures and options are both types of financial derivatives that allow investors to speculate on the future price movements of assets. They are similar in that they both involve contracts that give the holder the right to buy or sell an asset at a specified price in the future. However, futures require the holder to fulfill the contract, while options give the holder the choice to exercise the contract. Additionally, futures are standardized contracts traded on exchanges, while options can be customized contracts traded over-the-counter.

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What is futures and option?

First of all, we need to distinguish between Futures and Options. Both are derivative instruments but futures are futures, options are options, they are not the same thing. Futures contracts are contracts that investors go into that agrees to trade the underlying asset for a fixed price in the future. Options contracts are contracts that gives the buyer of the contract the right but not the obligation to buy or sell the underlying asset at a fixed price. Both are very different and have their own characteristics. I would suggest you read about the differences between futures and options.Three popular derivatives are forwards, futures and options. A futures contract is an agreement to purchase a certain amount of a commodity for a price on a certain date. Say...100,000 bushels of wheat on August 1 for $5 per bushel. The very similar forwards contract is an agreement to purchase a commodity for a price on a certain date. The difference is the forwards contract doesn't say how much of it you're getting...a very important thing when you can't be sure just how big your crop will be. If Farmer Brown sells a futures contract for 100,000 bushels of wheat and harvests 90,000 bushels, he's got to come up with 10,000 bushels right away. Similarly, if he sells 100k and harvests 110k, he's got to contend with the vagaries of the open market for the rest of the crop. But by entering into a forwards contract he can deliver what he grew and not have many worries. Selling stock futures is really risky because if you sell a big futures position in Acme and the price does something you don't like, you'll lose money. Stock options are much better because if you bought the contract and you'll lose money by exercising it, you just let it expire.F&O stand for futures and options and though clubbed together, they don't mean the same thing. Future refers to a standardized contract that requires the delivery of an underlying asset, which could be a commodity, bond, currency, or a stock index, for a specified price at a predetermined date in the future. Options, on the other hand, are contracts that give the holder the right to buy or sell the underlying assets for a specified price during a specified period of time. The element of obligation, which is present in futures trading, is not there in the case of options. F&O trading can be very profitable for investors provided they are cued in to the stock markets. If you're a newbie F&O investor, it makes sense to consult a professional broker to get you started.


What is Future and Options trading?

First of all, we need to distinguish between Futures and Options. Both are derivative instruments but futures are futures, options are options, they are not the same thing. Futures contracts are contracts that investors go into that agrees to trade the underlying asset for a fixed price in the future. Options contracts are contracts that gives the buyer of the contract the right but not the obligation to buy or sell the underlying asset at a fixed price. Both are very different and have their own characteristics. I would suggest you read about the differences between futures and options.Three popular derivatives are forwards, futures and options. A futures contract is an agreement to purchase a certain amount of a commodity for a price on a certain date. Say...100,000 bushels of wheat on August 1 for $5 per bushel. The very similar forwards contract is an agreement to purchase a commodity for a price on a certain date. The difference is the forwards contract doesn't say how much of it you're getting...a very important thing when you can't be sure just how big your crop will be. If Farmer Brown sells a futures contract for 100,000 bushels of wheat and harvests 90,000 bushels, he's got to come up with 10,000 bushels right away. Similarly, if he sells 100k and harvests 110k, he's got to contend with the vagaries of the open market for the rest of the crop. But by entering into a forwards contract he can deliver what he grew and not have many worries. Selling stock futures is really risky because if you sell a big futures position in Acme and the price does something you don't like, you'll lose money. Stock options are much better because if you bought the contract and you'll lose money by exercising it, you just let it expire.F&O stand for futures and options and though clubbed together, they don't mean the same thing. Future refers to a standardized contract that requires the delivery of an underlying asset, which could be a commodity, bond, currency, or a stock index, for a specified price at a predetermined date in the future. Options, on the other hand, are contracts that give the holder the right to buy or sell the underlying assets for a specified price during a specified period of time. The element of obligation, which is present in futures trading, is not there in the case of options. F&O trading can be very profitable for investors provided they are cued in to the stock markets. If you're a newbie F&O investor, it makes sense to consult a professional broker to get you started.


Options and futures are zero sum game?

Each futures or options contract requires two counterparties to the trade: long and short. In other words, for futures contracts to materialise, there needs to be one buyer matched with one seller at a specific point in time, dealing in certain asset, at a certain delivery point. For options, a writer has to sell their contract onto a holder, who purchases the option. Again, the deliverable is specified and strike price established. Futures and options contracts are dealt daily on exchanges, such as CME or Euronext. These exchanges provide rules for trading the derivatives, such as options and futures. Moreover, these exchanges act as central counterparty to the trade between buyer and seller, long and short in futures or writers and holders for options. Futures contracts are marked-to-market daily, so that profit and loss on each position is calculated and added or removed from the trader's account. Therefore, one point gain on long position will equal one point loss on equivalent short position. The short pays long the daily difference in contract price changes via central counterparty. Reverse applies when prices go down, then short gains money and long loses it, but the difference will always be zero. So zero-sum game is: +1 gain on long equals -1 loss short which = 0


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For a more professional approach, firms like PAX MARKET FUNDS also provide access to futures charts, insights, and trading strategies that help investors make informed decisions. Pax Market funds


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