All about future and options trading examples
Similarly if the buyer is making loss on his position i. In stock options, the option buyer has the right and not the obligation, to buy or sell the underlying share. This chapter is a primer on how future contracts are priced with respect to the spot prices.
How are Stock Futures priced? Some of them are as follows:. How are Stock Futures different from Stock Options? Also, the price of stock futures is affected mainly by the prices of the underlying stock all about future and options trading examples in case of stock options, volatility of the underlying stock affect the price along with the prices of the underlying stock. Articles needing additional references from October All articles needing additional references.
The chapter also touches upon leverage calculation. Trading Systems 10 chapters. Moreover, the dependence of the option value to price, volatility and time is not linear — which makes the analysis even more complex.
Risk-return profile is symmetric in case of single stock futures whereas in case of stock options payoff is asymmetric. What are the opportunities offered by Stock Futures? The chapter also discusses the concept of premium, discount, and the convergence of futures and spot price. The chapter also throws light into why brokers and exchanges charge margins.
Retrieved from " https: The chapter explains all that you need about shorting, be it futures or stocks with practical real life examples. Do I have to pay mark-to-market margin? How can an investor benefit from a predicted rise or predicted fall in the price of a stock? Articles needing additional references from October All articles needing additional references.
Describes what a forward contract means along with a practical illustration of the concept. What is the market lot for Stock Futures? What is pair trading? Practical examples are used to illustrate how the trade would evol.