Future Trading is like making a deal to buy or sell something at a set price on a future date. For example, you might agree to buy a certain amount of corn at a specific price three months from now.
How it works?
Buy a future contract: If you think the price of share will go up, you can buy a contract now & sell it at a higher price later. If the price goes up, you make money.
Sell a future contract: If you think the price will go down, you can sell a contract & buy it at a lower price later. If the price drops, you make money.
Option trading is like making prediction on the future price of a stock, commodity, or index. Instead of buying the actual asset, you buy or sell contracts that give you the right to buy or sell the asset at a set price, called the strike price, before a certain date.
There are two main types of options:
Call Option: This gives you the right to buy the asset at the strike price if you think its price will go up.
Put option: This gives you the right to sell the asset at the strike price if you think its price will go down.
People use option trading for different reasons:
Speculation :Some traders try to profit from short-term price changes in the asset.
Hedging: Investors use options as insurance to protect against potential losses in their investments.
What is option selling?
Some traders sell options to collect premiums, which is like getting paid to take on certain risks.
Risk factor: Future & Option trading can be risky because it involves leverage, which can amplify both gains and losses. It's important to understand how options work and have a clear plan before getting started.
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