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In futures trading, the investor is obliged to sell or buy the shares or stocks in the future on the predetermined date. The assets are traded at the predetermined price in future trading.<br>The value of Options is determined based on the value of an underlying asset. Unlike futures trading in options trading, the investor is not under any obligation, to buy or sell the asset at a specific price before the expiration date of the contract. Depending on the will of the investors they can buy or sell the asset. Options are a derivative form of investment.<br>We will further look at the differences between futures and options(https://www.edelweiss.in/investology/introduction-to-derivative-markets-8335c5/what-is-the-difference-between-futures--options-738ba8) in this presentation.
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Introduction In futures trading, the investor is obliged to sell or buy the shares or stocks in the future on the predetermined date. The assets are traded at the predetermined price in future trading. The value of Options is determined based on the value of an underlying asset. Unlike futures trading in options trading, the investor is not under any obligation, to buy or sell the asset at a specific price before the expiration date of the contract. Depending on the will of the investors they can buy or sell the asset. Options are a derivative form of investment. We will further look at the differences between futures and options
Difference • As mentioned earlier future trading is associated with an obligation to complete the agreement and trade in the future at a predetermined date and price. In the case of options trading, the investor has an option to either trade or terminate the agreement at any time before the expiration date of the contract. • Future trading is associated with high risk as compared to Options trading. In options, the risks are limited to the premium amount only. • The future contract does not require any type of advance payment. Whereas in options trading you need to pay a premium amount upfront before the activation of the contract. • There are no limits on profits or losses in the future. In the case of options, the losses are limited, and the profits are high.
Conclusion Options and Futures operate differently but the basic essence of these financial products is the same as they try to profit from stock without investing the full sum. You should learn about derivatives even more to get a hold on the concept and become an active trader in the derivative markets, trading futures and options.
