What is Derivative Trading?
These are financial assets that derive their value from an underlying asset. The underlying assets can be equities & Indices. It is a contract between two parties. Commonly traded derivatives are
Futures: This derivative instrument is an agreement between two parties for the purchase and delivery of an asset at an agreed upon price at a future date. These contracts are standardized and are traded at exchange. The parties involved in this transaction are obligated to fulfil a commitment to buy or sell the underlying asset.
Options: Options are derivative instruments similar to futures. This is also an agreement between two parties to buy or sell an asset at a predetermined future date for a specific price. The key difference between options and futures is that, with an option, the buyer is not obliged to exercise their agreement to buy or sell. It is an opportunity only, not an obligation whereas futures are an obligation.
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