Sometimes derivates rule the stock market, usually, there are four types of derivatives namely Forward, Futures, OPTIONS, and Swap. Options are contracts that give you the right to buy or sell any security or index before the specified maturity and price, whereas in futures it is an obligation to sell or buy at the fixed maturity and price. Buying and selling happen at betting on a predetermined price. When the buyer buys from the seller at the predetermined price it is called the strike price. When we analyze that the market is doping then we do a short sale, we haven’t bought the stock yet but we are selling it and will buy it later. Here either you can buy first or sell first. In options, a premium fee is paid by the buyer to the seller.
Trading into options enthralls the traders because here the risk factor is comparatively low if the price moves in your preferred direction. From the regular market exercises, it has been observed that the sellers have earned usually more profits than the buyers have. The parties involved in option sellers are HNI investors, institutional investors. Terminologies attached with options are CALL OPTIONS, under this, there are call buyer and call seller. Second is PUT OPTIONS, when the seller exercises his/her power to sell any such asset it is put options. Here also there is put buyer and put seller.
Purchasing options can give you an edge over losses over time but sometimes they can drain your whole capital down. There are many strategies to deal with options but not every tact works. The income from options is a taxable income. Future and options are great for trading but they require an intense understanding of related concepts and terms and price movements.