Unit 4

Option Trading Strategies

Presented By-
Dr. Meera Hirapurkar
 Distinction between options and futures
contracts
• After going through the basic concept of the options
and futures contracts, one can visualize the basic
difference between these two, and that is to
OBLIGATION.
• In the options contracts, one party (buyer) is not
obligated to transact the contract at a later date, only
the other party ( seller) is under obligation to perform
the option contract and only if the buyer desires so.
• On the other hand, in case of futures contract, both
the parties, buyers and sellers, are under obligation to
perform the contract.
• In case of options contracts, one party (the
buyer) has to pay in cash the option price
(premium) to the other party (seller) and this
is not returned to the buyer whether he insists
for actual performance of the contract or not.
• In case of futures contract, no cash is
transferred to either party at the time of the
formation of the contract