Differences - Futures and Options

Futures

Contract is determined without extra cost
Future has right and obligation for both buyer and seller
Quantities, Unit Price, and Tenure are Pre-determined

Options

Options comes with extra purchase cost - premium has to be paid for.
Options has right but does not have obligation- Parties can use call or put method as optional
Buying and selling depends on parties wish to use for or not

Both the methods are widely used by companies to minimize their financial risk.

Its a hedging tool to minimize the risk exposure of underlying assets

Widely used in capital markets in stock trading and commodities

Capital value can be protected to a certain extent if market goes down and abnormal and if market goes high- buyers will have a option to buy at lesser price than at the usual selling price in the market.



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