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    F&O Basics

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    sanasri87
    Futures and options are contracts to buy or sell an asset at a predetermined price at a specified future date. They began in agriculture but now cover many products. Futures and options markets exist to transfer risk and facilitate price discovery. Trading works similarly to stocks, with gains and losses from price changes. However, futures use leverage and options risks depend on the position. Trading requires working with a broker and considering various account types and strategies.

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    F&O Basics

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    sanasri87
    3K views11 pages
    Futures and options are contracts to buy or sell an asset at a predetermined price at a specified future date. They began in agriculture but now cover many products. Futures and options markets exist to transfer risk and facilitate price discovery. Trading works similarly to stocks, with gains and losses from price changes. However, futures use leverage and options risks depend on the position. Trading requires working with a broker and considering various account types and strategies.

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    Futures and options are contracts to buy or sell an asset at a predetermined price at a specified future date. They began in agriculture but now cover many products. Futures and options markets exist to transfer risk and facilitate price discovery. Trading works similarly to stocks, with gains and losses from price changes. However, futures use leverage and options risks depend on the position. Trading requires working with a broker and considering various account types and strategies.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    3K views11 pages

    F&O Basics

    Uploaded by

    sanasri87
    Futures and options are contracts to buy or sell an asset at a predetermined price at a specified future date. They began in agriculture but now cover many products. Futures and options markets exist to transfer risk and facilitate price discovery. Trading works similarly to stocks, with gains and losses from price changes. However, futures use leverage and options risks depend on the position. Trading requires working with a broker and considering various account types and strategies.

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    Download as ppt, pdf, or txt
    of 11

    THE BASICS on 

    Futures & Options

    Kansas City Board of Trade
    What are futures and options?
     A contract to make or take delivery of 
    a product in the future, at a price set 
    in the present
     In formalized futures and options 
    trading on exchanges, standardized 
    agreements specify price, quantity, 
    and month of delivery
     Started in agriculture, but have 
    expanded to a wide range of products
    Example

     If you agree in April with your Aunt 
    Sue that you will buy two pounds of 
    tomatoes from her garden for $5, to 
    be delivered to you in July, you just 
    entered into a futures contract!
    Why do futures and options 
    markets exist?

     Risk Transfer
     Price Discovery 
    How does trading futures and 
    options work?
     Similar to stocks, gains and losses 
    are the result of price changes
    How does trading futures and 
    options work?
     Futures can be highly leveraged
     Options risks differ depending on 
    position
    How does trading futures and 
    options work?
     A number of factors 
    to consider including 
    account type,  
    trading style
     Traded through a 
    registered broker
    K.C. Isgreat: A simplified, 
    hypothetical trading example
     Do your 
    homework
     Choose a broker
     Enter into an 
    agreement
     Make your first 
    trade
    K.C. Isgreat: A simplified, 
    hypothetical trading example
     The first trade….
    K.C. Isgreat: A simplified, 
    hypothetical trading example
    Futures
    Transaction

    Sell futures 950.00
    Buy back futures 939.00

    Total Return 11.00 11.00 x $100=$1,100

    Sell futures 950.00
    Buy back futures 959.00

    Total Return ­9.00 9.00 X $100 = ­$900


    THE BASICS on 
    Futures & Options
    Ideas for portions of this presentation came 
    from “Understanding Opportunities and 
    Risks in Futures Trading,” a publication of 
    the National Futures Association. To order 
    that publication or other NFA materials, 
    please call the NFA’s Information Center 
    toll­free at 1­800­621­3570.
    This presentation is in no way intended to 
    provide a complete futures education. 
    Sources for additional information include 
    the NFA, the exchanges where various 
    products are traded, and your broker or 
    advisor.

    Value Line is a registered mark of Value 
    Line, Inc., a New York corporation that 
    provides financial services and 
    publications. Since 1982, the Kansas City 
    Board of Trade has been licensed to use the 
    Value Line mark in connection with its 
    efforts to establish futures markets tied to 
    the Value Line index. The Kansas City 
    Board of Trade and Value Line, Inc. are not 
    affiliated corporate entities.

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