The document defines options and futures contracts. It provides examples of different types of option contracts and discusses the key characteristics of options, including call and put options. It defines call options as giving the buyer the right to purchase an underlying asset and put options as giving the right to sell. It also discusses in-the-money, at-the-money, and out-of-the-money options based on the exercise price compared to the market price. The document then defines futures contracts and lists types of commodity and financial futures. It concludes by explaining the primary difference between options and futures - that options provide the right but not obligation to buy/sell the underlying asset, while futures contracts obligate the holder to fulfill the contract terms

1. Presented by:-
SuddhasatwaSatpathy
Sougata Sasmal

2.  Definition
An option is the right, but not the obligation to buy or
sell something on a specified date at a specified
price.
In the securities market, an option is a contract
between two parties to buy or sell specified number
of shares at a later date for an agreed price.
 Example
There can be many different option contracts as the
number of items to buy or sell. They are stock
options, commodity options, foreign exchange
options and the interest rate options.

3.  Characteristics:
1. The option to buy is a call option and the option to sell is a put
option.
2. The option holder is the buyer of the option and the option
writer is the seller of the option.
3. The fixed price at which the option holder can buy and /or sell
the underlying asset is called the exercise price or sticking
price.
4. The date when the option expires or matures is referred to as
the expiration date or maturity date. After the maturity date
the option is worthless.
5. The act of buying or selling the underlying asset as per the
option contract is called exercising the option.
6. Three parties are involved in the option trading, the option seller,
buyer and the broker.

4. Call Options:
 The option to buy is a call option (just call).
 The option holder is the buyer of the options.
 The call option that gives the right to buy.
 The name of the company whose shares are to be
bought or the underlying asset.
 The number of shares to be purchased.
 ATM Exercise price= Market price
ITM Exercise price< Market price
OTM Exercise price> Market price

5. Put Options:
 option to sell is put option (Just Put).
 option writer is seller of the options.
 The name of the company whose shares are to be sold.
 The number of shares to be sold.
 The selling price or the striking price.
 ATM Exercise price= Market price
ITM Exercise price> Market price
OTM Exercise price< Market price

6.  Definition:
Futures is a financial contract which derives its value from the
underlying asset.
 Types of Futures:
There are commodity futures and financial futures.
Commodity Futures:
In commodity futures, there are energy (crude oil, heating oil,
natural gas, gasoline ), agricultural (corn, wheat, cotton)
commodity futures and precious and industrial metal( gold, silver,
copper and platinum).
Financial Futures:
In the financial futures, there are foreign currencies, interest
rate, stock futures and market index futures.

7. The primary difference between
options and futures is that options
give the holder the right to buy or
sell the underlying asset at
expiration, while the holder of a
futures contract is obligated to fulfill
the terms of his/her contract

8. Instruments Buy
(cr.)
Sell
(cr.)
Net
position
(cr.)
Contracts Value
Index futures 95,087 101,917 [257.02] 312.072 11,774
Index options 976,808 991,466 [532.49] 1525.816 57,657
Stock futures 171,763 146,678 [1012.51] 1550.218 55,784
Stock options 128,852 129,112 [18.66] 108.374 4,021
The data’s are collected from the
www.indiainfoline.com/Markets/Derivatives
Last Traded on:10-Jul-2014

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