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Futures and
options are the part of derivative and mostly it is used for hedging by
institutional investors.In order to initiate trading in FUTURES you have to
understand how it works and how can get profit with your own analysis and
experience.Options and futures are both financial products investors can use to
make money or to hedge current investments. Both an option and a future allow
an investor to buy an investment at a specific price by a specific date. But
the markets for these two products are very different in how they work and how
risky they are to the investor.
Understand how
futures work & the risks
The investor may instead decide to buy a futures contract on RELIANCE. One
futures contract has as its underlying asset 250 shares of reliance. This means
the buyer is obligated to accept 250 shares of reliance from the seller on the
delivery date specified in the futures contract. Assuming the trader has no
interest in actually owning the reliance, the contract will be sold before the
delivery date or rolled over to a new futures contract.
Risk
As the price of RELIANCE rises or falls, the amount of gain or loss is credited
or debited to the investor's trading account at the end of each trading day. If
the price of Reliance in the market falls below the contract price the buyer
agreed to, the futures buyer is still obligated to pay the seller the higher
contract price on the delivery date.
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