What is the future and option

Question

Accepted Answer

Futures and options are financial derivatives that allow investors to speculate on the future price movements of an underlying asset.

Futures contracts are agreements to buy or sell an asset at a predetermined price on a specified future date.
Options contracts give the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified period.
Both futures and options are commonly used for hedging, speculation, and arbitrage in financial markets.
Example: A farmer can use a futures contract to lock in a price for selling their crops at a future date, protecting against price fluctuations.
Example: An investor can buy a call option on a stock, giving them the right to purchase the stock at a specific price before the option expires.
Example: Traders can use futures contracts to profit from the price difference between two related assets, such as crude oil and gasoline.

Accepted Answer

Keeping an eye on the current market to see what might happen next

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