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Introduction of Futures and Options
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Introduction to Futuresand Options
Futures and options are important financial instruments that allow
investors to hedge risk and speculate on price movements. They are
contracts between two parties that are based on an underlying financial
asset or instrument. In futures, the parties agree to buy or sell the asset
at a predetermined price on a specified future date. Options, on the
other hand, give the buyer the right, but not the obligation, to buy or
sell the asset at a predetermined price within a specified time frame.
by Roma Takkar
, Understanding Futures Contracts
Definition Mechanics Uses
Futures contracts are legal The mechanism involves Traders use futures contracts
agreements to buy or sell a standardizing contracts and for hedging against price
particular commodity or trading them on regulated fluctuations and speculating
financial instrument at a exchanges, ensuring fair and on future price movements.
predetermined price and date transparent pricing.
in the future.
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