Futures and options
without the fog.

Introduction

Know what you are entering.

Futures and options derive their value from an underlying asset. Their expiry, lot size, margin and payoff can create outcomes that differ sharply from simply owning a share.

Futures

A futures contract generally creates an obligation to transact later. Daily settlement and margin are central to understanding its risk.

Options

An option gives the buyer a right, not an obligation, while the seller accepts an obligation. Price, time and volatility all matter.

Leverage

Leverage can magnify both gains and losses relative to the capital posted. Define loss limits before participating.

Conclusion

Derivatives require education, monitoring and discipline. They involve significant risk and may not be suitable for everyone.