Option Markets
Options are standardized contracts that
allow investors to trade an underlying asset at a specified price before a
certain date (the expiry date for the options). There are two types of options: call and put options.
Call options give the buyer a right (but not the obligation) to buy the
underlying asset at a pre-determined price before the expiry date, while a put
option gives the option-buyer the right to sell the security.
Options are attractive to hedgers because they protect against loss in value but do not require the hedger to sacrifice potential gains. Most exchanges that trade futures also trade options on futures.
Options are attractive to hedgers because they protect against loss in value but do not require the hedger to sacrifice potential gains. Most exchanges that trade futures also trade options on futures.
Futures Markets
Futures
contracts are agreements to trade an underlying asset at a future date at a pre-determined price. Both the buyer and the seller are obligated to transact
on that date. Futures are standardized contracts traded on an exchange where
they can be bought and sold by investors.