in stock market i find the term futures and options ? what
was the meaning of that sensex futures and options
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future
A financial derivative which represents a contract sold by
one party (option writer) to another party (option holder).
The contract offers the buyer the right, but not the
obligation, to buy (call) or sell (put) a security or other
financial asset at an agreed-upon price (the strike price)
during a certain period of time or on a specific date
(excercise date).
options
options are 2 types
1. call option
2. put option
a Call Option gives its buyer the right to buy 100 shares
of the underlying security at a fixed price before a
specified date in the future-usually three, six, or nine
months. For this right, the call option buyer pays the call
option seller, called the writer, a fee called a Premium,
which is forfeited if the buyer does not exercise the
option before the agreed-upon date. A call buyer therefore
speculates that the price of the underlying shares will
rise within the specified time period. For example, a call
option on 100 shares of XYZ stock may grant its buyer the
right to buy those shares at $100 apiece anytime in the
next three months. To buy that option, the buyer may have
to pay a premium of $2 a share, or $200. If at the time of
the option contract XYZ is selling for $95 a share, the
option buyer will profit if XYZ's stock price rises. If XYZ
shoots up to $120 a share in two months, for example, the
option buyer can Exercise his or her option to buy 100
shares of the stock at $100 and then sell the shares for
$120 each, keeping the difference as profit (minus the $2
premium per share). On the other hand, if XYZ drops below
$95 and stays there for three months, at the end of that
time the call option will expire and the call buyer will
receive no return on the $2 a share investment premium of
$200.
The opposite of a call option is a Put Option which gives
its buyer the right to sell a specified number of shares of
a stock at a particular price within a specified time
period. Put buyers expect the price of the underlying stock
to fall. Someone who thinks XYZ's stock price will fall
might buy a three-month XYZ put for 100 shares at $100
apiece and pay a premium of $2. If XYZ falls to $80 a
share, the put buyer can then exercise his or her right to
sell 100 XYZ shares at $100. The buyer will first purchase
100 shares at $80 each and then sell them to the put option
seller (writer) at $100 each, thereby making a profit of
$18 a share (the $20 a share profit minus the $2 a share
cost of the option premium).
Is This Answer Correct ? | 29 Yes | 2 No |
Answer / zia
OPTION:
1)A CALL OPTION is a financial contract between two
parties, the buyer and the seller of this type of option.
Often it is simply labeled a "call". The buyer of the
option has the right, but not the obligation to buy an
agreed quantity of a particular commodity or financial
instrument (the underlying instrument) from the seller of
the option at a certain time (the expiration date) for a
certain price (the strike price). The seller (or "writer")
is obligated to sell the commodity or financial instrument
should the buyer so decide. The buyer pays a fee (called a
premium) for this right.
2)A PUT OPTION (sometimes simply called a "put") is a
financial contract between two parties, the buyer and the
writer (seller) of the option. The put allows the buyer the
right but not the obligation to sell a commodity or
financial instrument (the underlying instrument) to the
writer (seller) of the option at a certain time for a
certain price (the strike price). The writer (seller) has
the obligation to purchase the underlying asset at that
strike price, if the buyer exercises the option.
FUTURE:
A contract to buy or sell a specified amount of a commodity
or financial instrument at an agreed price at a set date in
the future. If the price for the commodity or financial
instrument rises between the contract date and the future
date, the investor will make money; if it declines, the
investor will lose money. The term also refers to the
market for such contracts.
Is This Answer Correct ? | 11 Yes | 1 No |
Answer / zia
A financial contract obligating the buyer to purchase an
asset (or the seller to sell an asset), such as a physical
commodity or a financial instrument, at a predetermined
future date and price.
A financial derivative which represents a contract sold by
one party (option writer) to another party (option holder).
The contract offers the buyer the right, but not the
obligation, to buy (call) or sell (put) a security or other
financial asset at an agreed-upon price (the strike price)
during a certain period of time or on a specific date
(excercise date).
Is This Answer Correct ? | 9 Yes | 3 No |
Answer / ranjitha
futures are the derevatives where the qty,date all agreed
in advance except the price
option is not obligation it is a right to buy or sell the
predetermined shares
Is This Answer Correct ? | 1 Yes | 1 No |
Answer / sirisha
futures and options are derivative instruments to hedge
against price fluctuation risk,they both are entered through
contracts.
future contract is a standardized contract where in one
party agrees to buy/sell a lot, of shares at a pre
specified rate on a future agreed date.it is traded on an
exchange floor (ex: bse and nse).
option is contract where buyer acquires a right (but not the
obligation) to buy/sell qty of shares at p respecified rate
at an agreed future date.there are two option contracts
1.call option(right to buy)2.put option(right to
sell).sensex f&O are index futures and options
Is This Answer Correct ? | 0 Yes | 0 No |
Answer / arifa
futures,where the two parties in the derivative market buy
&sell the asset at a certian time in the future at an
agreed price.
options are products
Is This Answer Correct ? | 0 Yes | 3 No |
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